Current Trends in Mortgage Rates Amid Rising Inflation
Prior to the outbreak of war, mortgage rates had largely been expected to continue on a downward trend in the UK this year. However, the recent escalation of conflict in Iran has significantly altered this outlook, as rising inflation fears have begun to take center stage.
The Bank of England is now unlikely to cut interest rates, a decision influenced by the increasing inflation driven by the ongoing war. Ben Perks, an economist, remarked, “When Trump dropped his first bomb on Iran, it blew up all hope of a rate reduction this month.” This sentiment reflects a broader concern among financial analysts that geopolitical tensions could lead to further economic instability.
In response to these changing economic conditions, major UK lenders have started to increase mortgage rates. For instance, the average two-year fixed residential mortgage rate rose from 4.82% to 4.84% between March 4 and March 9, 2026. Similarly, the average five-year fixed residential mortgage rate saw an increase from 4.94% to 4.96% during the same period. These adjustments signal a shift in the lending landscape as banks react to the evolving economic climate.
Barclays has announced plans to raise rates on some mortgage products starting March 10, 2026, further illustrating the trend among lenders to adjust their offerings in light of current events. As of March 9, 2026, the average two-year fixed homeowner mortgage rate was recorded at 4.87%, while the average five-year fixed homeowner mortgage rate stood at 4.98%. Numerous lenders, including HSBC and Nationwide, have also adjusted their fixed-rate offerings upwards, reflecting a cautious approach to lending.
Market analysts are now pricing in the possibility of only one rate cut for the entire year, with the likelihood of an interest rate rise before the end of the year estimated at 70%. Mike Staton, a financial expert, noted, “Yes, inflation is likely to tick up again with energy and fuel prices rising due to global conflict,” indicating that the repercussions of the Iran war are likely to be felt across various sectors of the economy.
Despite the current upward trend in mortgage rates, there remains a glimmer of hope for potential borrowers. Alice Haine, a mortgage broker, stated, “If the Middle East conflict proves short-lived and mortgage rates ease again, brokers can often switch borrowers to a better rate on their product right up until two weeks before their mortgage term starts.” This flexibility may provide some relief for those looking to secure favorable mortgage terms in the near future.
As the situation continues to develop, observers are closely monitoring the impact of the Iran conflict on inflation and mortgage rates. The escalation of conflict has revived inflation fears, which could further influence the decisions of the Bank of England and lenders alike. With house prices having risen by 0.3% in February 2026 following an 0.8% rise in January, the housing market remains dynamic, albeit under pressure from external factors.
In summary, the current landscape of mortgage rates in the UK is being shaped by rising inflation concerns linked to the ongoing conflict in Iran. As lenders adjust their rates and market expectations shift, potential borrowers must navigate a more complex financial environment.
You may also like
