The average mortgage rate tracked by Moneyfacts has climbed to 5.50% for the first time since August 2024, underlining the speed of repricing across the market this month.

The benchmark Moneyfacts Average Mortgage Rate rose from 4.89% on Monday 2 March to 5.50% by 4.30pm on Wednesday 25 March, according to the price comparison website.

Moneyfacts said this means the typical annual cost of borrowing £250,000 over 25 years has increased by more than £1,075 a year.

The last time the average stood at 5.50% or above was in August 2024. Moneyfacts said that, at the time, Bank Base Rate was 125 basis points higher at 5.00%, while CPI was 2.2% and market expectations pointed towards falling interest rates.

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

Moneyfacts said its average mortgage rate is calculated using all on-sale core market fixed and variable tracker mortgages.