UK homeowners hoping for further relief on their mortgage payments have been blindsided by a sharp turnaround in the market, with average rates climbing above 5% in response to the escalating Middle East conflict. Nearly 500 mortgage products were removed from sale within two days, as lenders moved urgently to reprice their offerings in line with surging financial market indicators. The speed and scale of the change has echoed the kind of market stress last witnessed in the chaotic aftermath of the 2022 mini-budget.
Swap rates — the interbank lending benchmarks used by mortgage lenders to set fixed-rate pricing — spiked sharply as the war involving the US, Israel, and Iran unfolded, forcing banks and building societies to act quickly. Household names including HSBC, Barclays, Halifax, and Nationwide all implemented rate increases, with HSBC announcing a further round of hikes to apply from Thursday. The competitive mortgage market, which had been providing borrowers with ever-cheaper deals in recent months, has shifted gear almost overnight.
Figures from Moneyfacts illustrated the change starkly: the average two-year fixed mortgage rate rose to 5.01%, reversing a sustained decline and returning to levels seen last summer. The five-year fixed rate reached 5.09%. While Adam French of Moneyfacts noted these withdrawals are smaller in scale than the 935 deals pulled during the mini-budget crisis, he described the latest episode as one of the most disruptive in recent memory.
For the approximately 1.8 million UK borrowers whose fixed-rate mortgages expire in 2026, the turn of events could not have come at a worse time. These households had reason for optimism as rates fell steadily through late 2025, but that trend has now reversed sharply. Economists had previously forecast two Bank of England base rate cuts this year, expectations that now look increasingly remote.
The March 19 central bank meeting is now expected to result in no change to the 3.75% base rate, with the pre-meeting probability of a cut collapsing from 80% to virtually nil. Broader forecasts for 2026 rate reductions have fallen from 50% likelihood to just 20% within days. French cautioned that whether rates stabilise or climb further will depend heavily on how the Middle East crisis evolves and what it means for global inflation.