The cost of a typical mortgage has skyrocketed by nearly £790 since the war in the Middle East began at the end of last month, new research suggests. Analysis by Moneyfactscompare.co.uk lays out how lenders have both pushed up rates and withdrawn deals in the wake of the US-Israeli strikes on Iran, triggering retaliations by Tehran against US bases in the region.
The country’s regime has also closed the Strait of Hormuz, a vital route for global oil trade, sending prices soaring and upending hopes of a Bank of England (BoE) interest rate reduction. The firm says the prospect of the BoE Base Rate (BBR) being cut looks increasingly unlikely, with the upheaval in mortgage repricing as a result of the inflationary shock from the fighting in the Middle East leading to the disappearance of sub-4% fixed mortgages.
Money Facts Compare says all of the biggest banks, including Barclays, HSBC, Lloyds Bank, NatWest and Santander, have raised rates since the beginning of March – and the spike in the average two-year fixed rate is startling.
The financial information service says it’s risen from 4.83% at the start of March to 5.28% now (Tuesday, March 17). It means the cost of a £250,000 mortgage over a 25-year term on a repayment basis is now £788.04 a year more expensive over 12 months than before the war broke out.
The company warns that prolonged uncertainty in the markets can lead to more rate increases or banks taking mortgage products off the market.
The last time the lowest two- and five-year fixed rates were priced above 4% was more than a year ago, in February last year, based on first-of-month data, the firm said.
Year-on-year average mortgage rates across the two-, five- and 10-year fixed sector have seen a drop, but recent rises mean the average two- and five-year rates have risen above 5%, it added.
Meanwhile, the Bank of England’s Base Rate (BBR) was reduced from 4% to 3.75% in December 2025, and since then the average standard variable rate (SVR) has dropped from 7.27% to 7.13% (0.14%). The BBR has seen a year-on-year decrease of 0.75%, but the average SVR has fallen by only 0.55%.
Rachel Springall, Finance Expert at Money Facts Compare, said while borrowers will be disappointed to see sub-4% mortgages being withdrawn, with swap rates increasing, they are not sustainable.
“Lenders look at margins very carefully, so it would be unwise to price their deals too low if the expectations are for interest rates to rise, even if over the short-term,” she added.
“The mortgage market needs stability, and really, borrowing costs are lower than in recent years, and we have had sub-4% deals on the shelves for over a year (since February 2025).”
Ms Springall noted that while many of the biggest lenders aren’t offering a sub-4% fixed deal any longer, it is a “cautious decision”.
“Mortgage rates are rising due to global pressures, not UK fiscal policy, so while not ideal, rate increases are not mirroring the ‘mini-Budget’ fiasco in 2022,” when former Prime Minister Liz Truss’ plans for unfunded tax cuts panicked the markets.
“In an unprecedented turn of events, the unrest in the Middle East has led to rising swap rates, which has inflated mortgage rates and caused deals to be pulled from sale, some temporarily,” the finance expert explained.
“These developments have scuppered expectations for the Monetary Policy Committee to vote for a cut to the Bank of England Base Rate, now much more likely for a hold this week.”
However, she warned that if this uncertainty persists and inflation spikes, “we could even see an increase to BBR before the year is over”.
“It really is too early to tell what might happen, but borrowers searching for a new deal should seek advice if they are concerned about rising costs.”
Ms Springall added that it is still “important to secure a fixed deal compared to a high revert rate, as almost £300 could be saved each month in repayments, and existing borrowers could lock into a new deal six months in advance”.
You can find the full analysis here. The BoE will announce its next decision on interest rates on Thursday, March 19, and is widely expected to keep the Bank Rate at its current level (3.75%).
