The Iran conflict has triggered the sharpest shock to the UK mortgage market since the UK mini-Budget, sending rates soaring in just one month. Rapid repricing, shrinking product choice, and worsening affordability are reshaping the landscape, with remortgage borrowers facing the biggest impact, as Moneyfacts data and analysis explain.
The impact has been swift and far-reaching. Mortgage deals have been rapidly repriced, with average two-year fixed rates jumping by 100bps in just one month (from 4.84% to 5.84%) and five-year fixes rising by 79bps (from 4.96% to 5.75%), marking the sharpest increase since autumn 2022.
At the same time, product choice has contracted significantly, with availability falling by 1,283 products—around 17% of the market, in the steepest drop since the mini-Budget disruption.
Remortgage borrowers are facing the biggest shock, particularly those rolling off older five-year deals, where rates have risen by more than 300bps, increasing monthly repayments by £417–£444.
Affordability has also deteriorated quickly, with typical borrowers now paying around £150 more per month on a £250,000 loan compared to costs at the start of the conflict, rising to as much as £167 for higher loan-to-value cases.
Even the most competitive deals have shifted sharply, with the lowest two-year fixed rate at 60% LTV climbing by 117bps from 3.51% to 4.60%, reflecting the speed at which lenders have responded to rising funding costs.
Adam French, Head of Consumer Finance at Moneyfacts, said:
“The conflict in Iran quickly upended rate expectations and sent borrowing costs skyrocketing in the biggest shock to the UK mortgage market since the aftermath of the 2022 mini-Budget.
Average mortgage rates have risen at pace, with two-year fixes increasing by 100 basis points from 4.84% to 5.84% in just one month and five-year fixes up by nearly 80 basis points, from 4.96% to 5.75%. The cheapest deals available to borrowers have moved dramatically too, the lowest two-year fixed rate at 60% LTV has increased by over 100 basis points from 3.51% to 4.60%. While this falls short of the extreme jumps seen in the aftermath of the mini-Budget, it is still a sharp and sudden shift that has materially worsened affordability in a very short space of time.
For many borrowers, the cost could be significant. Someone taking out a typical two-year fix will find it costs £150 more per month on average compared to just a few weeks ago. However, the real payment shock will be felt by those coming off older five-year deals, where rates have more than doubled, pushing up repayments by many hundreds of pounds per month.
The combination of rising rates, reduced choice and heightened volatility means borrowers and brokers are operating in a market where timing is critical and the window to secure competitive deals can be very short-lived. Unfortunately, anyone looking to buy or remortgage this year needs to prepare for substantially higher borrowing costs than expected before this conflict began.”
