The average UK mortgage is now costing borrowers up to £348 more per month compared with levels seen before the recent rate spike linked to tensions in the Middle East, new market analysis indicates.
Lenders have repriced mortgage products sharply in recent months as geopolitical developments fed through into inflation expectations and gilt yields, pushing up the cost of fixed-rate borrowing. The move has added further pressure to household budgets already stretched by elevated living costs.
According to market data, average fixed mortgage rates have risen rapidly since late February, with lenders also withdrawing or repricing products in quick succession as volatility increased across financial markets.
The rise has been driven in part by higher energy prices and renewed inflation concerns, which have reinforced expectations of interest rates remaining elevated for longer across the UK economy.
As a result, typical monthly repayments for new borrowers have increased materially, leaving average mortgage costs significantly higher than before the recent market shock.
Adam French, head of consumer finance at Moneyfactscompare.co.uk, which privided the data, said: “Higher mortgage rates are exposing big regional affordability imbalances. Based on current Moneyfacts average mortgage rates and the latest Rightmove house price data, for the same amount of borrowing a typical new mortgage in London is likely to cost around £348 more per month than before the Iran conflict spike in rates, compared to an increase of roughly £104 per month in the North East.
“Borrowers may soften the impact by securing a new mortgage deal up to six months before they need it to start, helping them lock in today’s rates while keeping the option to switch if cheaper deals appear. Speaking to a broker or lender about flexible options, such as extending the mortgage term to lower monthly payments, may also help in the short term but it will take longer to pay off and increase the total interest paid over time. In an uncertain market, acting early and staying flexible can help manage borrowing costs.
“Ultimately, the growing gap between the north and south underscores how higher rates will put greater affordability pressure on borrowers in already stretched and more expensive housing markets, while relatively lower house prices in other regions can help absorb some of that shock – at least for now.”
Mortgage calculations are based on Rightmove latest HPI, assuming a 10% deposit and borrowing at average new two-year fixed mortgage rates at 90% LTV over a 25-year term before the conflict in the Middle East began compared to average rates today. Comparison between the most and least expensive region according to Rigtmove asking price data
