Demand for variable and tracker deals has doubled compared to September last year, driven by the economic impact of the war in Iran, new analysis from Moneyfacts shows.
Higher borrowing costs have quickly changed borrower behavior, the comparison website said.
The data shows borrowers are increasingly turning to shorter-term fixed deals as mortgage rates have risen sharply since the war began in late February.
A growing number of borrowers are considering taking a chance on a variable or tracker rate mortgage in the hope that money markets have exaggerated expectations of interest rate rises, Moneyfacts says.
The share of borrowers looking for a variable or tracker deal has risen from 6% last September to 13% in April – an increase of 116%.
The share of borrowers looking for a two-year fixed rate has also increased slightly from 49% to 53%, but remains the most popular product choice.
In contrast, the popularity of five-year fixed rates has fallen 15%, from 27% of searches to 23%, as borrowers are reluctant to commit to high interest rates for the long term.
Price differences help explain the trend.
The average two-year interest rate has risen 94 basis points to 5.79% since early February, before the start of the war.
Average five-year interest rates have risen 75 basis points to 5.69% over the same period, but while the increase is slightly less severe, it is still significant and borrowers appear wary of being stuck with these rates for longer than necessary.
The average two-year tracker rate increased by a lower margin, by 20 basis points to 4.61%.
Recent figures from Stonebridge showed similar trends in product demand.
Adam French, head of consumer finance at Moneyfacts, said: “The economic fallout from the conflict in the Middle East has upended interest rate expectations, driving up borrowing costs and changing borrower behavior.
“With fixed mortgage rates rising sharply in a short period of time, more borrowers appear willing to gamble on a rate drop sooner than markets currently expect.
“There has been a noticeable shift among Moneyfactscompare.co.uk users, with more than twice as many potential borrowers researching variable and tracker mortgages compared to just over six months ago.
“While these products remain a minority choice, the increase suggests more borrowers may be willing to gamble that interest rates could fall in the near term.
“Tracker and discounted variable mortgages may appear more attractive when fixed rates rise quickly because they typically start lower.
“However, they also pass much more of the risk of future interest rate changes directly to the borrower, rather than the lender taking on that risk through a fixed-rate product.
“There has also been a shift towards fixed, shorter-term options.
“Many borrowers appear to prefer two-year deals, hoping the current rate hike will be temporary.”