Mortgage borrowers face payment shock as average rate hits 5.5%

Borrowers face £4.6K payment shock as fixes with the average mortgage rate hitting 5.50% for the first time since August 2024 according to new market analysis by Moneyfacts.

The data showed that the rate rose from 4.89% on Monday, 2nd March 2026, to 5.50% on Wednesday, 25 March 2026. As a result, the typical annual cost of borrowing £250,000 over 25 years has risen by more than £1,075 per year.

The last time the Moneyfacts Average Mortgage Rate was at 5.50% or higher was in August 2024. At that time, the Base Rate was 125 bps higher at 5.00%, while CPI was 2.2% and market consensus was that interest rates were trending downward.

The overall Moneyfacts Average Mortgage Rate peaked at 6.52% during the last rate rising cycle in August 2023. At that time, the Base Rate was at 5.25%, and CPI was at 6.7%.

Adam French, Head of Consumer Finance at Moneyfactscompare.co.uk, said “The Moneyfacts Average Mortgage Rate has hit 5.50% – heights last seen more than 18 months ago, marking another unwelcome milestone for borrowers this month. These rising costs are in direct response to the conflict in the Middle East which has dramatically shifted market expectations around inflation and future interest rates, with lenders scrambling to keep up with rising funding costs.

“Moneyfacts’ analysis of more than 30 years of historic rates data shows mortgage rates have historically averaged around 1.5-1.75 percentage points above Base Rate. If a couple of rate rises materialise as markets are currently predicting, this could see the overall average mortgage rate stabilise at around 5.75%-6.00%. This would leave borrowers paying £1,500-£2,000 more per year on a typical mortgage* compared to just a few weeks ago. However, given the volatility of events this is subject to change in either direction.

“While a quicker resolution to the conflict in the Middle East could ease pressure on rates, some inflation is already baked in, the reality is that a more volatile world is a more expensive world. Even though the most competitive deals will remain below average, anyone looking to buy or remortgage this year needs to prepare for substantially higher costs than previously expected.”