The benchmark Moneyfacts average mortgage rate has risen from 4.89% on 2 March to reach 5.50% on 25 March.
This means the typical annual cost of borrowing £250,000 over 25 years has risen by more than £1,075 per year.
The last time the Moneyfacts Average Mortgage Rate was at 5.50% or higher was in August 2024.
In August 2024, the Bank of England base rate was 125 basis points higher at 5.00%, but CPI was at 2.2% and market consensus was that interest rates were trending downwards.
The overall Moneyfacts average mortgage rate peaked at 6.52% during the last rate rising cycle in August 2023. At that time the base rate was at 5.25% and CPI was at 6.7%.
Commenting on the latest figures, Moneyfacts head of consumer finance Adam French says: “The Moneyfacts Average Mortgage Rate has hit 5.50% – heights last seen more than 18 months ago, marking another unwelcome milestone for borrowers this month.”
“These rising costs are in direct response to the conflict in the Middle East which has dramatically shifted market expectations around inflation and future interest rates, with lenders scrambling to keep up with rising funding costs.”
“Moneyfacts’ analysis of more than 30 years of historic rates data shows mortgage rates have historically averaged around 1.5-1.75 percentage points above Base Rate. If a couple of rate rises materialise as markets are currently predicting, this could see the overall average mortgage rate stabilise at around 5.75%-6.00%.”
“This would leave borrowers paying £1,500-£2,000 more per year on a typical mortgage* compared to just a few weeks ago. However, given the volatility of events this is subject to change in either direction.”
“While a quicker resolution to the conflict in the Middle East could ease pressure on rates, some inflation is already baked in, the reality is that a more volatile world is a more expensive world.”
“Even though the most competitive deals will remain below average, anyone looking to buy or remortgage this year needs to prepare for substantially higher costs than previously expected.”
This afternoon more lenders announced major price increases including Santander by up to 53 basis points and Clydesdale by up to 78bps.
Virgin Money, The Mortgage Works, NatWest, TSB, Leeds, Principality and many others have also announced rate hikes today.
