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What a difference a month makes for mortgage borrowers.
Just four weeks ago, a split Bank of England vote suggested competitive mortgage deals might stick around – and even improve – if interest rates were cut later this year.
The Bank held the base rate at 3.75% after a narrow 5–4 vote by the Monetary Policy Committee (MPC), and economists were forecasting one to three cuts in 2026, potentially bringing the rate down to 3–3.5%. Four committee members even voted for an immediate reduction, hinting a cut could come sooner than expected.
At the time, borrowers could secure eye-catching fixed deals well under 4%.
Since then, the outbreak of conflict in the Middle East has rattled markets. UK mortgage rates have surged past 5% as lenders withdraw hundreds of deals. The average two-year fixed now sits at 5.01%, with five-year fixes at 5.09% – the highest since mid-2025.
Over the past 72 hours, a large chunk of residential mortgage products has vanished, marking the sharpest short-term drop since the 2022 mini-Budget turmoil. A handful of sub-4% deals remain – but they are unlikely to last.
Hina Bhudia, partner, Knight Frank Finance, commented: “Barclays is the second major lender to withdraw sub 4% fixed rate mortgages aimed at purchasers, following HSBC’s decision earlier this week.
“This is a real blow to borrowers, who could access deals just above 3.5% only a month ago. There are still a handful of sub-4% fixed rate deals available, but they are likely on borrowed time. The larger banks like HSBC tend to set the tone and other lenders follow. The longer the conflict in the Middle East continues, the more investors will take the view that higher energy costs will feed inflation, putting upwards pressure on mortgage rates.
“Should this continue, tracker products may soon be cheaper than two year fixed products, which will be appealing for some, but each borrower will have to take a view on the risk that interest rates move against them.”
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