A massive remortgaging wave is set to hit the UK in 2026, and the timing could not be worse as the “Trumpflation” effect from the Iran war sends rates soaring. Nearly 700 mortgage deals have been pulled from the market in the last 14 days, with the average annual cost of a new loan rising by £800. This unexpected surge in borrowing costs has left many homeowners facing a “ticking time bomb” of higher monthly payments.
The average two-year fixed rate has jumped to 5.28%, while the five-year fix has hit 5.32%. According to Moneyfacts, this is the most significant market upheaval since the 2022 mini-budget. The rise in rates means that a borrower with a £250,000 mortgage will pay roughly £788 more per year if they opt for a two-year fixed deal today versus two weeks ago.
The volatility is being fueled by a spike in swap rates, as lenders anticipate that higher energy prices will drive inflation back up. This has led to a “clearing of the decks” among mortgage providers, with the number of products below 4% interest falling from 490 to just nine in a week. The competitive “price war” that had been emerging earlier this year has officially ended.
Economists have also adjusted their expectations for the Bank of England. While two rate cuts were predicted for later this year, the immediate concern is now holding rates steady at 3.75%. A cut this Thursday, once considered highly likely, is now off the table. Some commentators even suggest that rates could rise if energy-driven inflation becomes entrenched.
Homeowners are being urged to speak with brokers sooner rather than later. With lenders repricing their portfolios at a rapid pace, a deal available today might be gone by tomorrow. The “Trumpflation” wave is proving to be a formidable challenge for the UK housing market and its 1.8 million remortgagers.