Average mortgage rates have climbed to their highest level since summer 2024, pushing up borrowing costs for buyers and remortgagers as lenders react to rising swap rates.
The benchmark Moneyfacts average mortgage rate rose from 4.89% at the start of March to 5.50% by 25 March, marking the first time the measure has reached that level in more than 18 months.
The increase means the typical cost of borrowing £250,000 over 25 years has risen by more than £1,075 a year in just a few weeks, underlining how quickly market conditions have changed.
The last time the average rate was at this level was in August 2024, when the Bank of England base rate was higher than today but inflation was falling and markets expected borrowing costs to ease.
INFLATION CONCERNS
Rates remain below the peak of the last tightening cycle, when the Moneyfacts average reached 6.52% in August 2023, but the latest rise reflects growing concern about inflation and the outlook for interest rates.
Adam French (main picture, inset), Head of Consumer Finance at Moneyfactscompare.co.uk, 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.”
DIRECT RESPONSE
And he adds: “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.
“While a quicker resolution to the conflict could ease pressure on rates, the reality is that a more volatile world is a more expensive world, and anyone looking to buy or remortgage this year needs to prepare for higher costs than previously expected.”
