Mortgage Deals Return at Higher Rates as Lenders Contact 1.6 Million Borrowers
Mortgage products have started to trickle back onto the market, but they come with substantially higher interest rates, according to financial information website Moneyfacts. This development occurs as lenders prepare to proactively contact 1.6 million customers whose fixed-rate deals are set to finish before the end of 2026.
Sharp Rise in Average Mortgage Rates
Moneyfacts reported that the average two-year fixed-rate homeowner mortgage has increased from 4.83% at the beginning of March to 5.75% by Friday morning, marking the highest average rate since August 2024. Similarly, the average five-year fixed-rate mortgage has risen from 4.95% at the start of March to 5.69% on Friday, reaching its highest level since December 2023.
These hikes follow a period where hundreds of deals disappeared from the market amid changing expectations in financial markets. Swap rates, which lenders use to price mortgages, have increased, partly due to the conflict in the Middle East pushing up inflation expectations.
Adam French, head of consumer finance at Moneyfacts, stated: "Mortgage rates have continued to rise sharply, with around three in four active lenders increasing rates, launching or withdrawing products this week."
Lenders' Commitment to Customer Contact
Mortgage lenders met with Chancellor Rachel Reeves on Thursday, securing a commitment to proactively contact the 1.6 million customers whose fixed-rate deals will expire between now and the end of 2026. Lenders will outline customers' options and explain how to access bespoke support.
Ms Reeves emphasized on Thursday: "In uncertain times, people need clear reassurance and practical help." The Chancellor also reaffirmed the Mortgage Charter with lenders, which helps ensure borrowers in difficulty receive support.
Trade-offs in Mortgage Support Options
Mr French welcomed the lenders' recommitment to the charter but cautioned about the trade-offs involved. He explained: "Options such as extending a mortgage term or switching to interest-only can ease monthly pressures in the short-term but increase the total cost of borrowing over time, so they need to be carefully considered and clearly explained by lenders and brokers."
He added that while these measures may provide breathing space and help households avoid falling into a debt trap, they do not solve the underlying affordability challenge. Many borrowers facing remortgage are now expecting to pay thousands of pounds more per year than anticipated just weeks ago, compounded by building inflationary pressures.
Market Dynamics and Lender Pressures
Moneyfacts noted that 160 products have been added to the market since Wednesday, but they are priced at much higher rates than previously, driving up average rates on new mortgages. However, there are still 1,620 fewer products on the market compared to when lenders began pulling deals in response to rising funding costs on March 9, 2026.
Hina Bhudia, a partner at Knight Frank Finance, warned: "Lenders risk becoming inundated and being forced to reprice even higher than they otherwise might have done, which creates a snowball effect – a more intense clamour to secure a rate that puts further pressure on lenders."
Lender Responses and Support Measures
On Thursday, a spokesperson for Santander UK said the bank is "carefully monitoring customers' financial health" and has a range of existing options to support those facing financial difficulties, tailored to individual circumstances.
Overall, the mortgage market is navigating a complex landscape where returning products offer little relief due to elevated rates, and lenders are stepping up efforts to guide borrowers through challenging financial transitions.
