Why the Middle East War will cause your Mortgage Rates to Rise Again
UK mortgage lenders have recently started increasing their mortgage rates, as concerns grow that the ongoing conflict in the Middle East could have a wider impact on the global economy. Financial markets are becoming more cautious that rising energy prices, particularly oil and gas, could push inflation higher again.
If inflation increases, it may limit the ability of the Bank of England to continue cutting interest rates in the near future. When expectations around interest rates change, mortgage lenders often respond by adjusting the rates they offer to new and existing customers.
Because of this uncertainty, several major UK lenders have already started increasing rates across some of their mortgage products.
Lenders Announce Rate Increases
A number of well-known lenders have confirmed changes to their mortgage pricing.
Nationwide Building Society has increased some of its mortgage rates by up to 0.25%. Meanwhile, HSBC UK and Coventry Building Society have also introduced rate increases across selected products.
HSBC has confirmed that mortgage rates for new customers have risen by between 0.1% and 0.25%, while existing customers looking to switch deals could see increases between 0.04% and 0.13%.
Coventry Building Society has also announced that its new mortgage rates will come into effect immediately, reflecting the wider changes currently taking place across the market.
A spokesperson for Nationwide said the lender keeps its mortgage rates “under continual review”, which highlights how lenders regularly adjust pricing in response to market conditions, funding costs, and economic expectations.
Current Average Mortgage Rates
Recent figures from Moneyfacts show that the average two-year fixed mortgage rate in the UK is now around 4.84%, while the average five-year fixed mortgage rate sits at approximately 4.96%.
Although these rates are lower than some of the peaks seen during recent interest rate rises, they are still significantly higher than the ultra-low mortgage deals many homeowners secured just a few years ago.
This difference is particularly important for homeowners who are coming towards the end of fixed-rate mortgage deals that were taken out when borrowing costs were much cheaper.
Nearly One Million Mortgages Approaching Renewal
One of the biggest concerns in the mortgage market right now is the number of homeowners whose five-year fixed mortgage deals are due to expire.
During 2021, mortgage rates were extremely low, with many deals available at below 2%. Because of this, a large number of borrowers chose to secure five-year fixed rates to lock in those low repayments.
Figures show that 971,105 five-year fixed-rate mortgages were taken out in 2021 alone. As these deals begin to expire throughout 2026, many of these homeowners will soon need to refinance or switch onto new mortgage products at today’s higher rates.
Potential Impact on Monthly Payments
For many households, moving from a mortgage rate below 2% to a rate closer to 5% could lead to a significant increase in monthly payments.
Based on earlier mortgage data from January, homeowners whose five-year fixed deals are ending were already expected to see average annual repayments increase by more than £2,000 when they move onto a new deal.
For borrowers who do not switch to a new fixed rate and instead move onto their lender’s standard variable rate (SVR), the increase could be even greater. In some cases, annual mortgage costs could rise by over £5,600 per year.
If global events continue to push inflation higher and lenders keep adjusting their mortgage pricing, these repayment increases could become even more noticeable for some households.
Why It’s Important to Review Your Options Early
While headlines about rising mortgage rates can sound concerning, it’s important to remember that every homeowner’s situation is different.
The best course of action will depend on factors such as:
- How long is left on your current mortgage deal
- Your remaining mortgage balance
- Your property’s current value
- Your future plans for the property
For some homeowners, it may be beneficial to review mortgage options early, particularly if your current deal is due to end within the next 6 to 12 months. In some situations, it may be possible to secure a new rate in advance or explore different mortgage options that better suit your circumstances.
Speak to Our Team
If you’re unsure how these changes may affect you, or if your mortgage deal is coming to an end soon, it’s always a good idea to seek advice and understand the options available to you.
If you have any questions about your current mortgage, remortgaging, or what the best decision may be for your situation, our team would be more than happy to help.
📞 Call us today on 0121 681 6327 and we can talk through your current circumstances and help you explore the best options available to you.