The UK mortgage market has experienced its sharpest shock since the 2022 mini-Budget, with the Iran conflict triggering a rapid rise in borrowing costs over the past month.
According to the latest Moneyfacts data and analysis on how the UK mortgage market has changed over the last month in response to the war in Iran, product availability has fallen sharply, with more than 1,200 mortgage deals withdrawn in a single month.
At the same time, mortgage rates have been repriced quickly, with average two-year fixed deals rising from 4.84% to 5.84% and five-year fixes increasing from 4.96% to 5.75% – the steepest jump since autumn 2022.
The impact is being felt most by borrowers coming off older fixed-rate deals, who are facing increases of more than 300 basis points and significantly higher monthly repayments. Affordability has also worsened, with typical borrowers paying around £150 more per month on a £250,000 loan, and more for those with higher loan-to-value ratios.
Even the most competitive rates have moved up quickly, with the lowest two-year fixed deals at 60% LTV rising by more than one percentage point as lenders respond to higher 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.”
Data tables
Table 1: Average mortgage rates
| Mini-Budget 2022 | Iran conflict 2026 | ||||
Mortgage term | 23 Sep-22 | 24 Oct-22 | Difference | 1 Mar-26 | 1 Apr-26 | Difference |
Average 2 Year Fixed Mortgage | 4.74% | 6.55% | +181 bps | 4.84% | 5.84% | +100 bps |
Average 5 Year Fixed Mortgage | 4.75% | 6.43% | +168 bps | 4.96% | 5.75% | +79 bps |
Average mortgage rates compared before and at the end of a 31-day period. Source: Moneyfactscompare.co.uk | ||||||
Table 2: Product availability
| Mini-Budget 2022 | Iran conflict 2026 | ||||
Mortgage term | 23 Sep-22 | 24 Oct-22 | Difference | 1 Mar-26 | 1 Apr-26 | Difference |
Available residential mortgage products | 3,961 | 3,067 | -894 (22.6% of the market) | 7,484 | 6,201 | -1,283 (17% of the market) |
Net change in available residential mortgage products before and at the end of a 31-day period. Source: Moneyfactscompare.co.uk | ||||||
Table 3: Effect on remortgage customers
Mortgage term & LTV | Old rate | New rate | Difference | Monthly difference | Annual difference |
Remortgage from a 2-year fix – average rate | 5.80% | 5.84% | +4 bps | +£6 | +£72 |
Remortgage from a 2-year fix – lowest rate (60% LTV) | 4.46% | 4.66% | +20 bps | £28 | +£336 |
Remortgage from a 5-year fix – average rate | 2.77% | 5.84% | +307 bps | +£430 | +£5,160 |
Remortgage from a 5-year fix – lowest rate | 1.23% | 4.66% | +343 bps | +£444 | +£5,328 |
2-year average mortgage rate and lowest rate as per 1 April 2024 . 5-year average mortgage rates and lowest rate as per 1 April 2021 compared to cost of borrowing £250,000 over 25 years to average and lowest 2-year fixed rate available to remortgage customers as per 1 April 2026). Source: Moneyfactscompare.co.uk | |||||
Table 4: Change in average mortgage costs at different LTVs
Mortgage term & LTV | 1 Mar-26 | 1 Apr-26 | M-o-m difference | Extra cost (monthly) | Extra cost (annual) |
Average 2 Year Fixed Mortgage | 4.84% | 5.84% | +100bps | +£148 | +£1,777 |
Average 2 year fixed (95%) | 5.45% | 6.40% | +95 bps | +£145 | +£1,736 |
Average 2 year fixed (90%) | 5.08% | 6.12% | +104 bps | +£156 | +£1,872 |
Average 2 year fixed (75%) | 4.72% | 5.70% | +98 bps | +£144 | +£1,731 |
Average 2 year fixed (60%) | 4.23% | 5.39% | +116 bps | +£167 | +£2,007 |
Average 5 Year Fixed Mortgage | 4.96% | 5.75% | +79 bps | +£117 | +£1,405 |
Average 5 year fixed (95%) | 5.47% | 6.18% | +71 bps | +£108 | +£1,292 |
Average 5 year fixed (90%) | 5.12% | 5.98% | +86 bps | +£129 | +£1,544 |
Average 5 year fixed (75%) | 4.90% | 5.66% | +76 bps | +£112 | +£1,347 |
Average 5 year fixed (60%) | 4.56% | 5.43% | +87 bps | +£127 | +£1,520 |
Cost of borrowing £250,000 over 25 years at rates on 1 March 2026 versus 1 April 2026. Rates on a first of month basis Source: Moneyfactscompare.co.uk | |||||
Table 5: Lowest rates
| Mini-Budget 2022 | Iran conflict 2026 | ||||
Mortgage term | 1 Sep-22 | 1 Oct-22 | Difference | 1 Mar-26 | 1 Apr-26 | Difference |
Lowest two-year fixed rate (60% LTV) | 3.24% | 4.56% | +132 bps | 3.51% | 4.60% | +109 bps |
Source: moneyfactscompare.co.uk | ||||||
Read the orginal article: https://propertyindustryeye.com/biggest-shock-to-uk-mortgage-market-since-mini-budget-disaster/?utm_source=rss&utm_medium=rss&utm_campaign=biggest-shock-to-uk-mortgage-market-since-mini-budget-disaster
