Mortgage rates are expected to stay elevated for ‘some time yet’ despite signs that some of the recent upward pressure may be easing, according to financial analysts. Data from financial information website Moneyfacts shows the average two-year fixed-rate homeowner mortgage has risen sharply in recent months, climbing from 4.83% at the start of March to 5.90%, its highest level since July 2024.
Meanwhile, the average five-year fixed-rate mortgage has increased from 4.95% at the beginning of March to 5.78%, marking its highest level since November 2023. The increases came amid heightened global uncertainty, although markets have shown signs of stabilising after the United States and Iran agreed to a two-week ceasefire, which helped global stock markets recover.
Moneyfacts said calmer financial markets could help steady mortgage pricing, although significant reductions are unlikely in the short term.
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Adam French, head of consumer finance at Moneyfacts, said: “Markets have reacted to easing tensions by pushing down expectations for future interest rate rises. Because swap rates (which are used by lenders to price mortgages) reflect these expectations, they have started to fall too, reversing some of the sharp increases seen since the conflict began.
“It should take the immediate upward pressure off mortgage rates. However, rates are likely to remain higher for some time yet. The volatility of the conflict can quickly move markets, which may leave many lenders cautious about making any sudden moves.
“The longer the ceasefire holds and markets remain calm, the more the mortgage market will stabilise and rates could even begin to edge lower. But for now, it’s more likely to slow or pause increases rather than trigger any sharp falls.”
The outlook comes as new figures from Halifax suggest the UK housing market may already be feeling the impact of higher borrowing costs. The lender reported that the average UK house price fell by 0.5% month-on-month in March, reflecting growing uncertainty among buyers, writes Vicky Shaw from PA.
Amanda Bryden, head of mortgages at Halifax, said: “The recent slowdown in the housing market reflects the wide uncertainty regarding the conflict in the Middle East. Concerns about higher energy prices have pushed up inflation expectations, which in turn led to a rise in mortgage rates, reducing confidence that interest rates will be cut this year and dampening the initial momentum in the market seen at the start of the year.”
The latest figures highlight the continued pressure on borrowers as geopolitical uncertainty and inflation concerns continue to influence interest rate expectations and mortgage costs.
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