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, 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.

“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, a degree if 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.”

The Moneyfacts Average Mortgage Rate is calculated from the total of all on-sale, core market, fixed and variable tracker mortgages. Full methodology here.

*Cost calculation assumes a £250,000 mortgage borrowed over a term of 25 years.