Mortgages at less than 4 per cent are fast disappearing as banks and building societies get ready for a year of rising interest rates and inflation.

Conflict in the Middle East has triggered a global economic fallout, ending hopes of falling interest rates this year. The number of mortgages on the market has fallen from 7,603 on February 27 to 6,972, according to the analyst Moneyfacts.

The average two-year fixed mortgage rate has risen from 4.83 per cent on February 27 to 5.1 per cent. The average five-year rate is up from 4.95 per cent to 5.25 per cent. More than a million homeowners who are coming to the end of a fix this year had been expected to benefit from falling interest rates.

But lenders have been raising rates over the past fortnight amid fears that disruption to the supply of oil and gas through the Strait of Hormuz will lead to high inflation and cause the Bank of England to keep the base rate of interest at 3.75 per cent, or even increase it.

The Bank’s monetary policy committee will meet on Thursday. Before the outbreak of war in the Middle East, there had been expectations that it would cut the rate to 3.5 per cent.

Banks are pulling mortgages as quickly as they did in the fallout from the mini-budget in 2022, when billions of pounds in unfunded tax cuts spooked financial markets. Andrew Montlake from the mortgage broker Coreco said: “It’s complete carnage at the moment. It does feel similar to after the mini-budget in terms of the number of products being changed, although the rate increases are not quite as dramatic.

“You can still get fixed rates around 4 per cent, though.”

NatWest is due to increase fixed rates by up to 0.35 percentage points from Tuesday. Its two-year fixed rate available at up to 60 per cent loan-to-value with a £1,495 fee will increase from 3.97 per cent to 4.32 per cent.

Aaron Strutt from the broker Trinity Financial said: “While this was expected it’s a bit of a blow because NatWest has been consistently offering cheap mortgages for quite some time.” Strutt said brokers were expecting more banks and building societies to increase their rates this week so anyone in the market for a mortgage should lock in a new rate as soon as possible.

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He added: “We are not at the stage where mortgages are outrageously expensive, but while the turmoil in the Middle East continues rates may keep rising.”

Santander has had some of the cheapest rates on the market, with a 3.83 per cent deal on a two-year fix for someone buying a home, and 3.92 per cent for someone remortgaging, both with a £999 fee. But it will also increase fixed rates by up to 0.35 percentage points tomorrow.

Nationwide Building Society, which had some of the last sub-4 per cent mortgage rates on the market, will also increase its pricing by up to 0.35 percentage points on Tuesday.

You can often lock in a new rate up to six months in advance of your deal ending and still switch if a better deal comes along.