Homeowners and prospective buyers in the UK are facing increased borrowing costs as nearly all major mortgage lenders have raised their rates in recent days. The shift follows a period of global economic instability, which has been exacerbated by the ongoing conflict involving Iran, leading to higher government borrowing costs.

Data from Moneyfacts indicates that the average interest rate for a new two-year fixed mortgage is currently 5.65%, while five-year deals average 5.70%. For a typical borrower with a £250,000 loan, this represents an increase of approximately £120 per month compared to rates available at the start of March. Those transitioning from older, lower-rate five-year deals may see their annual costs rise by more than £5,000.

Bank of England Governor Andrew Bailey noted that UK borrowers have experienced some of the most significant mortgage rate increases among G7 nations since the onset of the current geopolitical tensions. Furthermore, the cost of UK government debt has climbed, with 30-year bond yields reaching 5.82% on Tuesday—the highest level recorded since 1998.

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Financial experts are advising borrowers to secure new deals as early as possible, as many lenders permit customers to lock in rates up to six months before their current term expires. Despite the current trend, analysts remain divided on whether these hikes will continue. "The difficult bit is knowing whether this is the end or just the first round of increases," said David Hollingworth of broker L&C.

The rising costs arrive at a time when many buyers are entering the market with smaller deposits. Bank of England data shows that the share of mortgages with a loan-to-value ratio exceeding 90% has reached an 18-year high, leaving these borrowers particularly vulnerable to market fluctuations.

Source: BBC News