Sub-4% mortgage rates disappear as lenders continue to pull and reprice deals

As the market continues to react to the ongoing conflict in the Middle East, borrowers have now lost access to any fixed mortgage deals under 4%. In fact, Moneyfacts UK has confirmed that almost 1,500 mortgage deals have been withdrawn since early March when the conflict began. Rachel Springall, Finance Expert at Moneyfacts UK, said: “If rates keep moving up as they are, average rates could well end up inverting again, where the five-year becomes lower than the two-year”.

Which mortgage deals are affected?

Almost all mortgage deals are now affected by increases driven by market turmoil from the Middle East conflict. Rates have increased for first-time buyers, homemovers, and those remortgaging from existing deals that are due to expire.

The average 2- and 5-year fixed rates have jumped from 4.84% and 4.96% to 5.43% and 5.45%, respectively. First-time buyers with smaller deposits to put towards property purchases are facing even steeper rises, with average rates for 95% loan-to-value mortgages now exceeding 6.00%.

You can find our latest mortgage rate updates in the article “Best mortgage rates in the UK”.

Last week, we reported on shrinking mortgage shelf lives as lenders removed deals, some of which have been repriced, while others are no longer available. If predictions, currently pointing to multiple Bank of England base rate rises in 2026, persist, we are likely to see more of the same, so securing a rate is crucial for those who have yet to fix one. You can search for the best mortgage rates for your specific needs using our mortgage rate comparison tool, which searches mortgage deals for purchase, remortgage and buy-to-let customers.

Why are mortgage rates increasing?

The global instability caused by the US and Israel’s attack on Iran and the subsequent disruption to oil, gas and goods transportation through the affected region is driving market volatility. There is growing concern that the rising cost of energy and goods will push inflation higher, and that borrowing costs will continue to rise alongside this.

While the Bank of England’s (BoE) Monetary Policy Committee did not vote for a rate increase at its review last week, lenders had been pricing mortgage deals on the premise that the base rate would be cut at least twice this year, and this is almost certainly off the table now. So, not only are lenders backpedalling on rates that had baked-in expectations of base rate cuts, but they are also trying to ascertain whether base rate increases are to be expected and, more pertinently, how many the BoE might make.

Swap rates, which are the rates banks use to hedge the fixed mortgage rates they offer, have risen by a whole percentage point since the beginning of March when the conflict began. This means the cost of lending is rising and is now the highest it has been in over a year, further indicating that rates will inevitably climb unless the conflict changes course.

How to secure the best mortgage rates quickly

Borrowers will need to act quickly to secure the best available rates, particularly those who may have been waiting to see rates fall further before fixing, based on the general trajectory that was true only four weeks ago. It is also important to note that locking in a rate with your lender may not preclude you from taking a better rate if one becomes available before you have to fix.

Buying a house or moving

Homebuyers may have different options depending on which stage of the process they are at. Those at the start of the process may be more vulnerable as they are less likely to have completed a mortgage application to secure an offer. Homebuyers at this point in the journey should seek advice and try to complete a mortgage application sooner rather than later. Bear in mind that a mortgage in principle is only an indication of how much money you might be able to borrow and generally does not lock in a rate of interest. Those with accepted mortgage applications should check how long their rate will be held while they wait to complete their purchase. If a mortgage application is nearing expiration due to delays with your house purchase, you should speak to your mortgage broker to work out which options are available to you to limit your exposure to higher interest rates.

Remortgaging

Around 1.8 million mortgage holders are due to remortgage from an expiring mortgage deal this year. Perhaps the most important thing to note is that you can lock in a new rate up to 6 months before your current mortgage deal expires. While lenders' product transfer windows tell you when you can transfer to a new deal with your existing lender, you can start shopping the wider market sooner than this might indicate. It is wise to start at least six months before your current deal is up, as you may be able to secure a rate while staying open to a better one if it comes up. Below, we explain how a mortgage broker can help you with this.

Borrowers remortgaging from a 2-year fixed deal may still see a reduction in the interest rate they were previously paying, but it may not deliver the savings they expected. Average mortgage rates are now roughly on par with what they were two years ago.

Borrowers who are remortgaging at the end of a 5-year fixed deal are more likely to move to a higher rate than they were previously paying and as such should take advice before locking in a new rate. Affordability measures have been easing over the last few years, and it may be prudent to search the whole market for the best deal - you may find that a lender that previously would not have accepted your financial circumstances now does and if they offer a better rate, it could be worthwhile switching lenders.

Get a mortgage broker's help

Acting with speed and care to secure a mortgage rate can be tricky, as there is a lot to navigate, and some mortgage rates are not readily advertised to borrowers, while others can only be secured through an intermediary. Getting a mortgage broker's guidance is almost always valuable, but under the current mortgage climate, it is almost priceless. A mortgage broker can readily search thousands of deals, ascertain which ones you will qualify for and help you expedite a mortgage application.

If you do not have a mortgage broker, you can source one using the online directory for financial professionals, Vouchedfor*. It organises mortgage brokers based on your local area and their area of expertise, allowing you to view other customers' reviews of the service they provide before you make contact. If you prefer an online and over-the-phone service, you may find the mortgage broker, Habito*, more streamlined for your needs. It provides the same mortgage broking services as most, but does so free of charge, over the phone and online, making it easier for some to access. You will get access to over 90 lenders' mortgage deals as well as some very useful guidance in choosing the deal that best suits your circumstances.

 

If a link has an * beside it this means that it is an affiliated link. If you go via the link, Money to the Masses may receive a small fee which helps keep Money to the Masses free to use. The following link can be used if you do not wish to help Money to the Masses or take advantage of any exclusive offers - Habito, Vouchedfor