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If you've been waiting for the perfect
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time to fix your mortgage, that window
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might have just slammed shut. In just 3
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weeks, the UK mortgage market has
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undergone its most dramatic shift since
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the infamous 2022 mini-budget. Since the
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outbreak of the conflict in Iran, the
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number of available mortgage deals has
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shrunk by nearly 20%.
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That is 1/5 of the entire market
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vanishing in less than a month. Well,
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it's all down to the engine room of
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mortgage pricing, known as swap rates,
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going on high alert. Swap rates are used
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by lenders to price mortgages and
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reflect the market's expectations for
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future central bank base rates. As
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global oil and gas prices fan the flames
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of inflation fears due to Gulf tensions,
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the Bank of England's path to cutting
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interest rates has hit a massive
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roadblock. Investors are now pricing in
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an elevated interest rate path, meaning
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the cheap debt we hoped for in 2024 is
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effectively off the table. This is a
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major adjustment for those scouting for
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a new mortgage. According to financial
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information website Moneyfacts, over 700
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deals disappeared in a single weekend as
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tensions in the Middle East reached a
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boiling point. Giant lenders like
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Barclays and Nationwide have already
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begun hiking rates on their remaining
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products. And the numbers tell the
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story. At the start of March, the
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average 2-year fix sat at 4.83%
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and this week it's jumped to 5.43.
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For a family on a mid-size mortgage,
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that's hundreds of pounds in extra
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interest every single year. The dream of
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affordability returning to 2021 levels
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has, in the words of experts, collapsed.
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And economists at JP Morgan are now
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forecasting at least two more interest
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rate hikes this year. The Bank of
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England is trapped in a tricky seesaw,
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trying to balance a cooling economy
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against new inflationary pressures of
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rising energy costs. But for the average
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homeowner, the message is clear. The era
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of wait-and-see on interest rates is
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becoming increasingly expensive.
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Geopolitics in the Middle East is now
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directly dictating the monthly cost of
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your spare bedroom. For the latest on
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the mortgage market and all the economic
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fallout from the crisis in the Middle
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East, stick with cityam.com.
