Sub‑4% fixed rate mortgages disappear as UK lending costs surge

Sub‑4 per cent fixed rate mortgages disappear as UK lending costs surge

Britain’s mortgage market is nearing the end of its last remaining fixed-rate deals below 4%, as lenders react to sharply rising borrowing costs due to the escalating conflict in Iran.

Today, NatWest withdrew its final sub-4% offer, increasing its two-year fixed remortgage rate for borrowers with a 40% deposit from 3.97% to 4.32% starting tomorrow. Most of its other deals are also rising by about 35 basis points.

Santander and Nationwide Building Society still offer some sub-4% options, with Santander’s two-year fixed rates starting at 3.78% and Nationwide’s starting at 3.79% (for borrowers with a 40% deposit and a £1,499 fee).

According to analysts at Moneyfacts, the average two-year fixed rate has now reached 5.2%, the highest level since April 2025, while the average five-year fixed rate stands at 5.25%, an increase from 5.19% last week. Almost 10% of mortgage products have been withdrawn in just a week, leaving 6,972 residential products available.

This surge in rates corresponds with the rise in 10-year gilt yields, which are now just under 4.8%. This increase is largely driven by the global energy crisis triggered by the Iran conflict, and it is expected to negatively impact the London property market.

Previously, the Bank of England was anticipated to cut its benchmark rate from 3.75% to 3.5%. However, rising inflation pressures associated with energy prices now make such a move nearly impossible.

Families and property buyers are facing a rapidly shrinking pool of affordable mortgage deals, as geopolitical turmoil pushes UK borrowing costs to multi-year highs.