UK mortgage rates have risen sharply in recent days, surpassing 6% for the first time in months, as escalating tensions in the Middle East fuel concerns about persistent inflation, according to financial data released this week.
The average rate on two-year fixed mortgages climbed above 5%—reaching its highest level since August—while five-year fixed deals are now at their most expensive since June, Moneyfacts reported. Approximately 500 mortgage products were withdrawn from the market over the past two days, a volume not seen since the immediate aftermath of the September 2022 mini-budget crisis.
The shift comes as the conflict between the US-Israel and Iran has disrupted expectations of near-term interest rate cuts by the Bank of England. Prior to the outbreak of hostilities, financial markets had anticipated a reduction in UK interest rates at some point in 2026. However, rising oil prices, driven by fears of supply disruptions, have now raised the prospect of continued inflationary pressure.
Oil prices experienced their largest weekly increase since 1983 last week, a surge that analysts say is a key driver of the current market volatility. Higher energy costs are expected to flow through the economy, increasing transportation and manufacturing expenses, and ultimately impacting the price of consumer goods. This renewed inflation risk is prompting traders to reassess their positions, pushing bond yields upward and, increasing mortgage rates.
“Recent days have been some of the most turbulent in the UK mortgage market since the aftermath of the September 2022 mini-Budget,” said Adam French, head of consumer finance at Moneyfacts. “It’s unwelcome news for borrowers, as the prospect of falling mortgage rates has quickly given way to rate rises,” he said, adding: “How far they could go is now heavily dependent on how global markets and inflation expectations evolve as conflict in the Middle East unfolds.”
Unlike previous instances of geopolitical instability, such as the start of the conflict in Ukraine in 2022, the current situation unfolds against a backdrop of already easing inflation. Markets had begun to anticipate gradual rate reductions in 2026. However, the potential for oil supply disruptions, particularly through critical shipping lanes like the Strait of Hormuz, is overriding those expectations.
Lenders are adjusting mortgage rates in response to evolving predictions regarding the future direction of the Bank of England’s base rate, which currently stands at 3.75%. The Bank of England uses the base rate to manage inflation, targeting a 2% level. The Monetary Policy Committee is scheduled to meet on March 19, 2026, to review monetary policy.
The market is too reacting to uncertainty surrounding the extent of U.S. Involvement in the Middle East, with shifting messaging from Washington contributing to investor unease. Financial markets require clarity, and the lack of a consistent narrative regarding U.S. Objectives is exacerbating volatility.
