Mortgage rates have fallen at the fastest pace for over a year, according to multiple reports, but contradictory data shows rates are also rising sharply, creating confusion for borrowers. The average two-year fixed rate fell from 5.87% to 5.83% on Wednesday, while the five-year fix saw its biggest drop since February last year, yet other sources indicate rates have jumped significantly since the start of March.
The recent drop in rates follows a period of increases triggered by geopolitical events and inflation. Mortgage rates shot higher after the US and Israel launched airstrikes on Iran eight weeks ago, according to multiple reports. Inflation jumped to 3.3% last month following the biggest rise in fuel prices since the invasion of Ukraine, adding further upward pressure on borrowing costs.
Mortgage pricing may have peaked for now. However, recent volatility is a reminder of how quickly it can all shift again. The Bank of England itself now faces a delicate balancing act: act too slowly and inflation could become entrenched; act too quickly and it risks unnecessarily squeezing households already under pressure.
Investor expectations have shifted due to hopes of a peace deal, reducing bets on rate hikes. According to multiple reports, investors have dramatically scaled back bets on rate hikes amid hopes of a peace deal. There is now less than a one-in-ten chance of a rate hike when the Monetary Policy Committee meets next week, but a nine-in-ten chance of a rate hike to 4% by the end of the year.
Despite the reported drop, many mortgage deals have been pulled from the market, and rates on remaining products are high. According to major media reports, banks and lenders have pulled almost 700 mortgage deals. There were just nine fixed-rate deals with rates below 4% on the market on Tuesday morning, and 689 fewer mortgage products on the market compared with March 9.
The latest rise tells us virtually nothing about the scale and duration of the inflation wave to come.
The average five-year fix has risen from 4.95% to 5.32%, according to major media reports. For a borrower with a £250,000 mortgage over 25 years, that equates to paying £788 more per year on a two-year fix compared to a fortnight ago. Adam French, head of consumer finance at Moneyfacts, said in a press release: "Mortgage pricing may have peaked for now. However, recent volatility is a reminder of how quickly it can all shift again. The Bank of England itself now faces a delicate balancing act: act too slowly and inflation could become entrenched; act too quickly and it risks unnecessarily squeezing households already under pressure."
The Bank of England is due to make its next base rate announcement on Thursday, according to major media reports. Expectations of any potential cut have fallen. According to Daily Mail - Money, James Smith described the latest rise as telling "virtually nothing about the scale and duration of the inflation wave to come." Ruth Gregory, according to Daily Mail - Money, described the coming months as "an uncomfortable ride for the Bank."
The coming months will be an uncomfortable ride for the Bank.
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said in a press release: "Borrowers looking for the lowest fixed rates will be disappointed to see the demise of sub-4% mortgages, but they are not sustainable with swap rates increasing. 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."
Adam French also said in a press release: "The average two-year fixed rate has jumped from 4.83% at the start of March to 5.28% today – its highest level since April 2025. The average five-year fix has risen from 4.95% to 5.32%, now at its highest since February 2025. For a borrower with a £250,000 mortgage over 25 years, that equates to paying £788 more per year on a two-year fix, or £651 more on a five-year deal compared to just a fortnight ago. Choice continues to fall as lenders pull deals and reprice in response to rapidly rising funding costs with 689 fewer mortgage products available since March 9 – almost a tenth of the market. Borrowers may need to brace for further volatility in the weeks ahead as the global economy braces for a ‘Trumpflation’ wave."
Borrowers looking for the lowest fixed rates will be disappointed to see the demise of sub-4% mortgages, but they are not sustainable with swap rates increasing. 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.
The conflicting reports on mortgage rates likely stem from different time periods: one source reports a one-day drop on Wednesday, while another reports a rise over the past two weeks. This discrepancy can confuse readers about the current direction of rates. The exact dates of the conflicting reports remain unclear, as does the current Bank of England base rate. The outcome of the Bank's next meeting is uncertain, with expectations of a cut fading and a rate hike possible by year-end.
The average two-year fixed rate has jumped from 4.83% at the start of March to 5.28% today – its highest level since April 2025. The average five-year fix has risen from 4.95% to 5.32%, now at its highest since February 2025. For a borrower with a £250,000 mortgage over 25 years, that equates to paying £788 more per year on a two-year fix, or £651 more on a five-year deal compared to just a fortnight ago. Choice continues to fall as lenders pull deals and reprice in response to rapidly rising funding costs with 689 fewer mortgage products available since March 9 – almost a tenth of the market. Borrowers may need to brace for further volatility in the weeks ahead as the global economy braces for a ‘Trumpflation’ wave.