Mortgage rates rise and deals pulled over Iran war turmoil

Turbulence in the UK mortgage market is at its most intense since the mini-Budget of 2022, figures suggest, as the average rate on two-year fixed deals rose above 5%.

The rate is at its highest level since August, according to financial information service Moneyfacts. Five-year mortgages are at their most expensive since June.

More mortgage products have been pulled off the shelves in the last two days than at any time since the aftermath of the mini-Budget, when Liz Truss was prime minister.

Anyone renewing a fixed mortgage, or looking for a new one - such as first-time buyers - will be affected.

Before the US-Israel war with Iran began, financial markets had been expecting a cut in UK interest rates at some point this year.

But these expectations vanished after rising oil prices raised the prospect of higher inflation.

The yield, or interest rate, on two-year government bonds - which indicates how much it would cost to borrow money for two years - has been volatile.

"Recent days have been some of the most turbulent in the UK mortgage market since the aftermath of the September 2022 mini-Budget," said Adam French, head of consumer finance at Moneyfacts.

"It's unwelcome news for borrowers, as the prospect of falling mortgage rates has quickly given way to rate rises," he said, adding: "How far they could go is now heavily dependent on how global markets and inflation expectations evolve as conflict in the Middle East unfolds."