The Iran conflict has triggered the sharpest shock to the UK mortgage market since the 2022 mini-Budget, sending rates soaring in the space of just one month.
Moneyfacts has outlined five key ways the residential mortgage market has shifted in the last month.
1. Mortgage deals rapidly repriced. Average two-year fixed rates jumped 100bps in a month (4.84% to 5.84%), with five-year fixes up 79bps (4.96% to 5.75%), marking the sharpest rise since autumn 2022.
2. Product choice contracted. Mortgage availability has fallen by a net 1,283 products (17% of the market) in one month, the steepest contraction by market share since the mini-Budget disruption.
3. Shock for remortgage borrowers. Those rolling off older five-year deals are hardest hit, with rates up 300bps and repayments rising by £417–£444 per month (£5,000+ annually).
4. Affordability deteriorated quickly. Typical borrowers now face an £150 extra per month (+£1,777 annually) on a £250,000 loan compared to costs at the start of the conflict, with higher LTV borrowers seeing increases of up to £167 per month.
5. Lowest rates moved sharply higher. The cheapest 60% LTV two-year fixed rate has risen 117bps (3.51% to 4.60%), as the most competitive deals have been quickly repriced in response to rising funding costs.
Adam French, head of consumer finance at Moneyfacts, said: “The conflict in Iran quickly upended rate expectations and sent borrowing costs skyrocketing in the biggest shock to the UK mortgage market since the aftermath of the 2022 mini-Budget.
“Average mortgage rates have risen at pace, with two-year fixes increasing by 100 basis points from 4.84% to 5.84% in just one month and five-year fixes up by nearly 80 basis points, from 4.96% to 5.75%. The cheapest deals available to borrowers have moved dramatically too, the lowest two-year fixed rate at 60% LTV has increased by over 100 basis points from 3.51% to 4.60%. While this falls short of the extreme jumps seen in the aftermath of the mini-Budget, it is still a sharp and sudden shift that has materially worsened affordability in a very short space of time.
“For many borrowers, the cost could be significant. Someone taking out a typical two-year fix will find it costs £150 more per month on average compared to just a few weeks ago. However, the real payment shock will be felt by those coming off older five-year deals, where rates have more than doubled, pushing up repayments by many hundreds of pounds per month.
“The combination of rising rates, reduced choice and heightened volatility means borrowers and brokers are operating in a market where timing is critical and the window to secure competitive deals can be very short-lived. Unfortunately, anyone looking to buy or remortgage this year needs to prepare for substantially higher borrowing costs than expected before this conflict began.”
