Mortgage rates have climbed again after lenders reversed a run of recent cuts

Around 750,000 UK households are set to see their mortgage payments jump by an average of £170 a month this year as cheap fixed-rate deals expire.

That amounts to roughly £2,040 extra per year for families currently paying less than three per cent interest.

Bank of England data shows these homeowners locked into low rates before borrowing costs surged from 2022 onwards. They now face remortgaging at far higher rates in a market that has turned against them.

Mortgage rates have climbed again after lenders reversed a run of recent cuts. The average two-year fixed rate now sits at 5.63 per cent, while the typical five-year fix has reached 5.66 per cent.

Swap rate volatility, fuelled by the ongoing Middle East conflict and fears it could drive up oil prices and reignite inflation, is behind the upward shift.

According to Moneyfacts, the average new mortgage rate climbed from 5.47 per cent in July to 5.59 per cent in August, erasing the previous month's 0.12 percentage-point decline. Three consecutive months of falling fixed rates have now been undone.

Lenders price their mortgage products based on swap rates, which reflect the cost of borrowing for banks. When global instability raises inflation concerns, swap rates tend to rise and mortgage pricing follows.

Rachel Springall, finance expert at Moneyfacts, said: "Lenders were somewhat forced to U-turn on fixed rate cuts in July, knocking back the short-lived progress of three consecutive months of reductions to the average two- and five-year fixed rates."

She added: "The prolonged conflict has driven up oil and energy prices, raising inflationary fears which could in turn lead to future Base Rate increases by the Bank of England."

The Bank Rate currently stands at 3.75 per cent after being held at its July meeting.

Many of the affected households took out five-year fixed deals in 2021, when rates below three per cent were widely available.

On a £110,000 mortgage over 25 years, monthly repayments at 2.9 per cent would be £516, but at 5.66 per cent that figure leaps to £686.

Homeowners with the smallest deposits are being hit hardest. The average five-year fix for those borrowing at 95 per cent loan-to-value has now crossed the six per cent threshold, reaching 6.08 per cent according to Moneyfacts.

Matt Coulson, founder of mortgage broker Heron Financial, said: "Deals are lasting barely a fortnight, and it's the borrowers with the least room who feel it most, with some five-year fixes at 95 per cent loan-to-value now back above six per cent."

The Bank of England has warned that the typical owner-occupier remortgaging over the next two years faces a smaller average rise of £45 a month, but those leaving the cheapest pre-2022 deals will see far steeper increases.

There is some relief for borrowers searching for options. The number of mortgage products on the market has grown for a fourth straight month, rising by 180 to reach 7,357.

Moneyfacts estimates that around 90 per cent of deals pulled during the market upheaval in March and April have now been restored.

NatWest has also begun trimming rates, making more than 200 cuts across its new business range, with reductions of up to 24 basis points.

Yet the window to secure a good deal is narrowing fast. In July, the average mortgage product remained on the shelf for just 11 days before being withdrawn or replaced, down from 14 days in June. That marks the shortest lifespan since April, when deals lasted as little as eight days during the worst of the market turmoil.

Ms Springall urged homeowners approaching the end of their deals to start looking well in advance. She said: "Borrowers could choose to refinance with their existing lender for ease, but it's always wise to shop around first to get a sense of the new rates on offer, particularly if coming off a low-rate deal."

Delaying could prove expensive as the average standard variable rate, currently sits at 7.13 per cent, according to Moneyfacts. That is down from 7.42 per cent a year ago but still painfully high.

Borrowers who lock in a deal early can typically switch to a cheaper one later if rates fall, provided they have not yet completed.

Mr Coulson cautioned against reading too much into short-term movements.

"The bigger picture hasn't shifted. Until the monthly cost of borrowing genuinely comes down and stays down, this is what I'd expect: small moves in both directions, and a market that stays stuck rather than turning," he said.