Homeowners are grappling with what a financial information website has termed “pricing turmoil”, as rates on some short-term fixed-rate mortgages have now surpassed their longer-term counterparts.
Moneyfacts reported that the average two-year fixed residential mortgage rate climbed to 5.56 per cent on Wednesday morning, an increase from 5.51 per cent on Tuesday.
This rise means it now outstrips the average five-year fixed residential mortgage rate, which also saw an uptick to 5.54 per cent on Wednesday, from 5.52 per cent the previous day.
Rachel Springall, a finance expert at Moneyfactscompare.co.uk, commented: “The turmoil in fixed mortgage rate pricing has worsened, as ongoing hikes have made the two and five-year fixed rates invert, where five-year is slightly cheaper on average.
“Swap rates (which are used by lenders to price mortgages) have been inverted for a few days now, so it was only a matter of time for the market to catch up. There is hope this will be a temporary blip until the markets settle down, but it depends how long volatility prolongs.
“This is unusual, however it’s all down to how the markets foresee interest rate setting, many expect higher rates over the shorter-term.
“This abnormality happened after the fallout from the mini-budget, and it took around three years for the inversion to end.
“In a traditional market, the average two-year fixed deal would be lower than the five-year, but the unrest in the Middle East is causing concerns over path of interest rate setting, with inflation expected to spike in the months ahead.
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“The damaging impact on the uncertainty surrounding the future of interest rates has also led to a drop of over 1,500 options from the residential mortgage market since the start of March, so there are less than 6,000 options, and if deals come back within the coming days, they will likely be at inflated rates to catch up with the current state of play.
“After all, a volatile mortgage market tends to be a more expensive one.”
Moneyfacts’ figures were released as the Office for National Statistics (ONS) said the average house price increased by 1.3 per cent in the 12 months to January, easing back from annual growth of 1.9 per cent in December.
Across the UK, the average house price in January was £268,000.
Average house prices increased to £290,000 (1.1 per cent annual growth) in England, £210,000 (2.0 per cent) in Wales, and £188,000 (1.3 per cent) in Scotland, in the 12 months to January 2026.
The average house price in Northern Ireland was £196,000 in the fourth quarter of 2025, showing an annual increase of 7.5 per cent.
The ONS also said that the rate of Consumer Prices Index (CPI) inflation was unchanged last month from the level reported in January.
The steady picture for inflation in the ONS figures has not yet reflected the impact of the conflict in the Middle East on rising prices.
David Hollingworth, associate director at L&C Mortgages said the steady figures “will be of little comfort to mortgage borrowers”.
He said: “The sharp change in outlook for inflation as a result of rising oil and gas prices has already sent mortgage rates substantially higher than at the beginning of March.
“Markets are anticipating that interest rates will remain higher for longer and are now factoring in interest rate rises.
“That’s a far cry from only a few weeks ago where an expectation of further cuts was the consensus.
“That swing is causing significant volatility and fixed-rate mortgages continue to be priced higher by lenders.
“Those hikes keep on coming as many lenders enter their third or fourth round of product changes in the last two to three weeks.
“That has seen a surge in borrowers rushing to lock in a rate before further increases take hold.
“Our figures show that the increase in the average of the best remortgage rates from the 10 biggest lenders means that a £200,000 mortgage on a two-year fixed-rate will cost almost £85 (per month) more now than at the beginning of the month.
“With prices at the pump already higher, borrowers will also be nervous about the increase in energy costs expected in coming months.
“Today’s figures are therefore likely be viewed as the calm before the storm by homeowners.”
Richard Donnell, executive director at Zoopla said: “While events in the Middle East have weakened demand in recent weeks, our data shows sales agreed are holding up as those with mortgages secured press on with transactions.”
Iain McKenzie, chief executive of The Guild of Property Professionals, said: “In this environment, pricing correctly from the outset is more important than ever.
“Sellers who understand their local market and set realistic expectations are still achieving sales in good time, with the average property in England and Wales taking around 40 days to find a buyer.
“However, we continue to see clear regional differences, with higher-value markets generally moving more slowly than more affordable locations.”
The ONS also said that the North West of England was the English region with the highest annual house price inflation in January, at 3.1 per cent.
In London, the average house price fell by 1.7 per cent annually in January – marking the six month in a row with annual falls recorded.
Jason Tebb, president of OnTheMarket, said: “Values in London continue to contract, by 1.7 per cent in the 12 months to January, due to increased supply and stretched affordability in the capital where property prices tend to be considerably higher than other parts of the country.”
The average monthly private rent in the UK was £1,374 per month in February, the ONS said, which was 3.5 per cent or £47 higher than a year earlier.
