Mortgage rates in the UK have started to rise again as lenders react to the ongoing conflict in the Middle East, which has raised concerns about inflation and the future direction of interest rates. The uncertainty has led many lenders to adjust their pricing, with several major banks already increasing mortgage rates in recent days.
Recent data from Uswitch shows that the average two-year fixed mortgage rate has climbed to 4.79%, up from 4.53% the previous week. At the same time, the average five-year fixed rate has risen slightly to 4.94%, compared with 4.89% previously.
These figures represent the average rates available across lenders for mortgages with a 75% loan-to-value (LTV) ratio. This means buyers would typically need a deposit of at least 25% of the property’s purchase price in order to access these deals.
Interest Rate Expectations Shift
The recent rise in mortgage rates comes as financial markets reconsider expectations for future interest rate cuts. Earlier in the year, falling inflation had encouraged hopes that the Bank of England might begin reducing interest rates sooner.
However, growing geopolitical tensions in the Middle East have altered that outlook. Rising energy prices and wider global instability could add fresh inflationary pressures, potentially delaying or limiting any cuts to the base rate.
For now, the Bank of England has kept its base interest rate at 3.75%, which was widely expected by economists. Even so, lenders have started adjusting mortgage pricing in response to shifting market conditions.
Major Lenders Begin Increasing Rates
Several well-known lenders have already increased mortgage rates across different products.
HSBC raised a number of mortgage rates, affecting products available to first-time buyers, home movers, remortgage customers and buy-to-let landlords. The bank increased rates late last week and again earlier this week.
Similarly, Nationwide Building Society also raised rates on some mortgage deals, including products aimed at first-time buyers and homeowners switching or remortgaging.
Industry experts say these initial changes from large lenders are often followed by similar moves from others across the market.
Market Reaction to Inflation Concerns
According to David Hollingworth from L&C Mortgages, the geopolitical situation has pushed markets to expect stronger inflationary pressures in the months ahead.
When inflation expectations rise, lenders typically face higher funding costs when pricing fixed-rate mortgages. This is largely due to increases in swap rates, which lenders use to hedge the cost of long-term lending.
As a result, mortgage rates can move higher even if the Bank of England base rate remains unchanged.
Mortgage Deals Withdrawn
The recent volatility has also led lenders to temporarily withdraw mortgage products while they review their pricing.
Over the past 48 hours, nearly 500 mortgage deals have been removed from the market as lenders responded to rapidly rising swap rates. This marks one of the most significant short-term shifts in the mortgage market since the turbulence following the September 2022 UK mini‑Budget.
Market analysts say the withdrawals are part of a typical process where lenders pause certain products while recalculating interest rates before reintroducing updated deals.
Experts Expect Further Adjustments
Adam French of Moneyfacts described the recent developments as some of the most unsettled conditions seen in the mortgage market since late 2022.
He explained that lenders reacted quickly to rising swap rates, which forced them to reconsider the pricing of fixed-rate mortgage products.
Mortgage broker Nicholas Mendes from John Charcol also warned that more lenders may withdraw or reprice mortgage deals over the coming days as the market continues to respond to global events.
Examples of Rate Changes
Several lenders have already increased rates across a range of products.
At HSBC, the bank’s two-year fixed deal for borrowers with a large deposit increased from 3.89% to 4.09%, while its five-year fixed rate rose from 4.08% to 4.28%. For buyers with smaller deposits, rates are significantly higher. For example, HSBC’s 95% LTV deals currently stand close to 5%.
Meanwhile, NatWest increased its two-year fixed deal to 3.72% and its five-year rate to 3.89%, both slightly higher than the previous week.
Barclays also raised rates, with its two-year fixed mortgage increasing to 3.80%, while some five-year deals have risen above 4%.
Nationwide and Halifax Adjust Rates
Nationwide increased its two-year mortgage rate for first-time buyers to 3.92%, up from 3.67%. Its five-year deal also rose to 4.31%, reflecting the wider trend of increasing borrowing costs.
At Halifax, two-year fixed rates climbed to 4.16%, while five-year deals increased to around 4.15%. Interestingly, Halifax is currently one of the few lenders offering a five-year rate that is slightly cheaper than its equivalent two-year deal.
New Products Still Emerging
Despite the rate rises, some lenders are still introducing new mortgage products aimed at helping buyers enter the housing market.
For example, Santander recently introduced a 98% loan-to-value mortgage, allowing buyers to purchase a property with a deposit as small as 2%, provided they meet the lender’s affordability checks.
Other lenders are experimenting with alternative options, including zero-deposit mortgages, longer mortgage terms and higher income-based borrowing limits to help buyers manage affordability challenges.
Outlook for Borrowers
The current uncertainty in global markets means that mortgage pricing could continue to fluctuate in the short term. While the recent increases are not expected to trigger the dramatic rate spikes seen in previous years, they could reverse some of the gradual improvements borrowers had seen earlier this year.
For those planning to secure a new fixed-rate mortgage, experts suggest that acting sooner rather than later may be sensible. With global tensions continuing to influence financial markets, the direction of mortgage rates in the coming months remains difficult to predict.
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