Typical new mortgage costs soar £788 a year in two weeks

A typical mortgage taken out now is £788 a year more expensive than before the Iran war began, new data has revealed.

The increase relates to homeowners and buyers with a 25-year mortgage of £250,000, and an average two-year fixed rate of 5.28%.

The figures, compiled by financial information service Moneyfacts, show how lenders have hiked rates and withdrawn deals since the US-Israel strikes on Iran began at the end of February.

The biggest lenders have pulled the best sub-4% mortgage deals, but brokers say borrowers can still navigate the huge uncertainty and should plan well ahead before any current deal expires.

For borrowers, the interest rate on a fixed mortgage does not change until the deal expires, usually after two or five years, and a new one is chosen to replace it.

Variable deals, such as tracker rates, usually move in line with changes to the Bank of England's benchmark interest rate. The Bank's rate-setting committee meets later this week.

Moneyfacts data shows the average two-year fixed rate has jumped from 4.83% at the start of March to 5.28% now, its highest since last April.

For those looking for a five-year deal, the average rate has gone up from 4.95% to 5.32% over the same period and is now at its highest level since February last year.

For a typical mortgage, that means a five-year fixed deal is now £651 more expensive than a fortnight ago, Moneyfacts said.

"Borrowers may need to brace for further volatility in the weeks ahead as the global economy braces for a 'Trumpflation' wave flowing from the US and Israel-led action in Iran," said Adam French, head of consumer finance at the financial information service.

The data shows 689 fewer mortgage products are available than on 9 March, representing almost a tenth of the market.

This is still far less dramatic than the aftermath of the Liz Truss mini-Budget, delivered by then Chancellor Kwasi Kwarteng, when a quarter of mortgage deals available at the time were pulled.

Among the deals now being pulled are the most competitive two-year fixed products with an interest rate of less than 4%.

Barclays, HSBC, NatWest, Nationwide and Santander no longer offer sub-4% fixed deals, which were available last week.

Recent moves will be a particular blow for first-time buyers, according to Mary-Lou Press, president of NAEA Propertymark - the National Association of Estate Agents.

"This shift highlights how sensitive mortgage rates are to wider economic uncertainty, making it harder for people to plan and potentially slowing activity across the housing market," she said.

"Even small increases in rates can significantly impact borrowing capacity and monthly costs, reinforcing the need for stability and confidence."

Before the US-Israel war with Iran began, financial markets had expected UK interest rates to be cut this year.

But these expectations vanished after soaring oil prices raised the prospect of higher inflation.

The yield, or interest rate, on two-year government bonds - which indicates how much it would cost to borrow money for two years - has been volatile since the conflict began.

Jo Jingree, from advice firm Mortgage Confidence, encouraged borrowers to talk to their brokers.

"I'm speaking to many anxious clients at the moment who often come away from our conversations feeling less overwhelmed and much more reassured," she said.

"Expert support is key. Mortgage advisers are in touch with lenders constantly and are surveying the changing rates on a daily basis."