Mortgage warning as rates rollercoaster continues – as experts say holding out for a deal could cost you £6k

MORTGAGE rates have been on a rollercoaster this year, and experts are warning borrowers not to expect a big drop before Christmas. Fixed deals started 2026 on a promising note, with rates edging down as hopes grew of further interest rate cuts. But that optimism was short-lived after war broke out in the middle east, sending oil prices soaring and pushing fixed rates back up. Rates have since settled but remain volatile, with the unpredictable situation in the Middle East still likely to have a major bearing on where they head next. Sign up for the First Time Buyer Guide newsletter Thank you! David Hollingworth, a mortgage expert, said the Bank of England has so far resisted any knee-jerk reaction despite market expectations that interest rates may need to rise. He explained that while inflationary pressure would normally push rates up, other data shows the jobs market is slowing, meaning the most likely outcome is that the base rate simply holds steady. He said if the Iran conflict eased, it could boost confidence in the markets and help push fixed rates back towards, or even below, 4%. But he warned there was equally a chance rates could climb if inflation worsens, and that borrowers should be prepared for further twists either way. New figures show just how much the recent turmoil has already cost homeowners. According to Moneyfacts, the average two-year fixed mortgage rate has jumped from 4.83% at the start of January to 5.6% today. Most read in Money Many homeowners who held off locking in a deal hoping rates would drop further have instead been caught out by sudden market shifts. For a typical £250,000 mortgage repaid over 25 years, recent rate rises mean borrowers taking out a new fixed-rate deal will now pay £112 more a month than they would have just a few months ago — an extra £1,344 a year. The penalty for waiting is even higher for borrowers whose current deals expire without a replacement in place. When a fixed-rate deal ends, borrowers are usually moved automatically on to their lender’s standard variable rate (SVR), which tends to be considerably higher and provides no protection against future rate increases. With the average SVR currently at 7.34%, a borrower moving from a 4% fixed rate on a £250,000 mortgage over 25 years could see their monthly repayments rise from about £1,320 to £1,820. That is an eye-watering increase of roughly £500 a month, or £6,000 a year. Rachel Springall, finance expert at Moneyfactscompare.co.uk, said borrowers would be frustrated that rates have failed to fall by any real amount in recent weeks and remain higher than they were at the start of July. Is your mortgage deal about to end? Get FREE advice and save £1,000s on repayments *If you click on this link we will earn affiliate revenue Falling onto your lender’s Standard Variable Rate (SVR) could cost you hundreds of pounds extra each month. Mortgage Advice Bureau compares your current deal against thousands of competitive remortgage offers to help lock in lower rates before your term ends. Book your free mortgage consultation now Mortgage Advice Bureau Limited. Registered Office: Capital House, Pride Place, Derby. DE24 8QR. Registered in England Number: 3368205 She said: “The conflict in the Middle East has pushed up energy prices and fuelled concerns over inflation, which in turn caused swap rates – a key influence on fixed mortgage pricing – to rise sharply. “This has made it much harder for lenders to reduce mortgage rates in the short-term.” Most economists do not expect the Bank of England to raise the base rate until 2027, which Springall said should offer some reassurance to nervous borrowers. But she warned that a 0.25 percentage point rise, if it did happen, would add around £38 a month, or £456 a year, to a typical mortgage. What can you do to avoid being stung? Her advice to homeowners is to seek help early, particularly those coming off a much lower fixed rate. Homeowners can lock in a new mortgage deal up to six months in advance. Securing a rate early ensures that borrowers are protected if rates continue to climb, but they can still switch to a cheaper option if mortgage pricing drops before their current term ends. First-time buyers are also urged not to hold out for a big drop in rates, as deals at higher loan-to-values have not moved as much as headlines suggest. Rachel Geddes, from Mortgage Advice Bureau, said getting a mortgage agreement in principle sorted early puts buyers in a stronger position the moment they find the right property. However, Ian Harris, president of NAEA Propertymark, said there could be some modest easing in fixed rates by the end of the year if economic conditions improve, but urged buyers not to bank on a dramatic fall. He said: “For homebuyers, the advice is to prepare now rather than wait for a significant fall in rates. “Get your finances and mortgage agreement in principle in place, understand what you can comfortably afford and be ready to act when the right property comes along.” Harris added that sellers should focus on realistic pricing and having paperwork ready to help deals go through smoothly, as buyers become increasingly focused on affordability. How to get the best deal on your mortgage IF you're looking for a traditional type of mortgage, getting the best rates depends entirely on what's available at any given time. There are several ways to land the best deal. Usually the larger the deposit you have the lower the rate you can get. If you’re remortgaging and your loan-to-value ratio (LTV) has changed, you’ll get access to better rates than before. Your LTV will go down if your outstanding mortgage is lower and/or your home’s value is higher. A change to your credit score or a better salary could also help you access better rates. And if you’re nearing the end of a fixed deal soon it’s worth looking for new deals now. You can lock in current deals sometimes up to six months before your current deal ends. Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost. But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first. To find the best deal use a mortgage comparison tool to see what’s available. You can also go to a mortgage broker who can compare a much larger range of deals for you. Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender. You’ll also need to factor in fees for the mortgage, though some have no fees at all. You can add the fee – sometimes more than £1,000 – to the cost of the mortgage, but be aware that means you’ll pay interest on it and so will cost more in the long term. You can use a mortgage calculator to see how much you could borrow. Remember you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks and looking at your credit file. You may also need to provide documents such as utility bills, proof of benefits, your last three month’s payslips, passports and bank statements. Comment now