Mortgage Rates Rise Amidst Inflation Concerns
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. The Bank of England is now unlikely to cut interest rates, as rising inflation fears have taken center stage in the financial landscape.
In response to these changing economic conditions, major UK lenders have begun to increase mortgage rates. The average two-year fixed residential mortgage rate rose from 4.82% on March 4, 2026, to 4.84% by March 9, 2026. Similarly, the average five-year fixed residential mortgage rate increased from 4.94% to 4.96% during the same period. This upward trend reflects a broader shift in market expectations regarding interest rates.
Barclays has announced that it will raise rates on some mortgage products starting March 10, 2026. As of March 9, 2026, the average two-year fixed homeowner mortgage rate stood at 4.87%, while the average five-year fixed homeowner mortgage rate was 4.98%. Numerous lenders, including HSBC and Nationwide, have also adjusted their fixed-rate offerings upwards, indicating a widespread response to the current economic climate.
Market analysts are now pricing in the possibility of only one rate cut for the entirety of this year, with the likelihood of an interest rate rise before the end of the year estimated at 70%. This shift in expectations comes in the wake of rising inflation, which has been exacerbated by the ongoing conflict in the Middle East. Ben Perks, a financial analyst, remarked, “When Trump dropped his first bomb on Iran, it blew up all hope of a rate reduction this month.”
Mike Staton, another expert, added, “Yes, inflation is likely to tick up again with energy and fuel prices rising due to global conflict.” This sentiment underscores the concern that the geopolitical situation is having a direct impact on domestic financial conditions.
Adam French noted that mortgage rates had initially appeared poised to fall ahead of an expected March base rate cut. However, he stated, “the escalation of conflict in Iran has abruptly shifted the mood and revived inflation fears.” This shift has left many potential borrowers reconsidering their options in a rapidly changing market.
Looking ahead, Alice Haine pointed out that 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 borrowers navigating this uncertain financial landscape.
As the situation continues to evolve, observers will be closely monitoring the interplay between geopolitical events and domestic economic policies. The impact on mortgage rates and the housing market remains a critical area of focus for both consumers and financial institutions alike.
