Typical £250,000 loan cost rises by more than £1,075 a year in less than a month
Mortgage rates rose again this week, with the benchmark Moneyfacts Average Mortgage Rate climbing from 4.89% at the start of the month to 5.50% by Wednesday (25 March) afternoon.
Price comparison website Moneyfacts said the move had increased the typical annual cost of borrowing £250,000 over 25 years by more than £1,075 in less than a month.
The last time the Moneyfacts Average Mortgage Rate was at 5.50% or above was August 2024. Moneyfacts noted that, at that point, Bank Rate was 125 basis points higher at 5%, consumer price inflation was 2.2%, and market expectations were that interest rates were moving lower.
Moneyfacts also pointed to the recent peak in its overall average mortgage rate during the previous tightening cycle. The measure reached 6.52% in August 2023, when Bank Rate stood at 5.25% and CPI was 6.7%. Today, the Bank Rate is at 3.75% and CPI is 3%.
Source: Moneyfacts
Adam French (pictured right), head of consumer finance at Moneyfactscompare.co.uk, linked the latest repricing to broader market moves.
“The Moneyfacts Average Mortgage Rate has hit 5.50% - heights last seen more than 18 months ago, another unwelcome milestone for borrowers this month,” French said. “These rising costs are in direct response to the conflict in the Middle East which has dramatically shifted market expectations around inflation and future interest rates.
“Moneyfacts’ analysis of more than 30 years of historic rates data shows mortgage rates have historically averaged around 1.5-1.75 percentage points above Base Rate. If a couple of rate rises materialise as markets are currently predicting, this could see the overall average mortgage rate stabilise at around 5.75%-6%.
“This would leave borrowers paying £1,500-£2,000 more per year on a typical mortgage compared to just a few weeks ago. However, given the volatility of events, this is subject to change in either direction.”
French stressed that while a quicker resolution to the conflict in the Middle East could ease pressure on rates, “the reality is that a more volatile world is a more expensive world.”
“Even though the most competitive deals will remain below average, anyone looking to buy or remortgage this year needs to prepare for substantially higher costs than previously expected.”
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