Average two- and five-year fixed rates surge as swaps reach highest levels since early 2025
The average two-year fixed residential mortgage rate has climbed from 4.83% at the beginning of March to 5.35%, according to Moneyfacts data. This represents the highest level since March 2025, increasing annual borrowing costs by approximately £900 for a £250,000 loan over 25 years.
Meanwhile, the average five-year fixed residential mortgage rate has increased from 4.95% to 5.39% during the same period, marking the highest point since July 2024. This adds roughly £775 annually to the cost of a £250,000 mortgage over 25 years.
Two- and five-year swap rates, which form the basis of mortgage pricing and reflect market expectations for central bank rates, have risen by approximately one percentage point since the Iran war began. They currently stand at around 4% to 4.25%, their highest level in over a year.
Research from INTEREST by Moneyfacts, examining more than three decades of historical rate data, shows that average mortgage rates typically settle at approximately 1.5 percentage points above the base rate.
Should the Middle East conflict continue disrupting the global economy and the base rate reach 4% to 4.25% as markets anticipate, average rates on new mortgages could stabilise at between 5.50% and 5.75%.
Such an outcome would add between £1,000 and £1,500 per year to the cost of borrowing £250,000 over 25 years compared to the overall Moneyfacts average mortgage rate of 4.89% recorded at the start of March.
“Swap rates, which underpin mortgage pricing, have risen sharply following the decision to hold the base rate at 3.75%, with markets interpreting commentary from the Bank of England as leaving the door open to rate rises amid ‘Trumpflation’ fears,” said Adam French (pictured right), head of consumer finance at Moneyfacts. “With two- and five-year swaps now sitting at their highest level in more than a year, lenders are once again facing higher funding costs, and this will feed through into mortgage pricing.
“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 higher costs than previously expected.”
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