Mortgage rates ‘likely to remain higher for some time yet’

Mortgage rates are likely to remain higher for “some time yet” despite some signs of the upward pressure easing, according to a financial information website.

Global stock markets have been recovering after the US and Iran agreed a two-week ceasefire, and website Moneyfacts said that calming markets should have a stabilising impact on the mortgage market.

The average two-year fixed-rate homeowner mortgage on the market has jumped from 4.83% at the start of March to 5.90% – the highest level since July 2024 – according to Moneyfacts.

The average five-year fixed-rate homeowner mortgage has risen from 4.95% at the start of March to 5.78% – the highest since November 2023.

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 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.”

Halifax said on Wednesday that the average UK house price fell by 0.5% month-on-month in March.

Amanda Bryden, head of mortgages, 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.”