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 shifted the economic landscape, leading to renewed inflation fears and adjustments in mortgage rates across major lenders.
The Bank of England has indicated that it is unlikely to cut interest rates in the near future, primarily due to the rising inflation caused by the ongoing situation in Iran. 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 that global conflicts can have immediate and far-reaching impacts on domestic financial policies.
In response to the changing economic conditions, major UK lenders have begun 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, while the average five-year fixed residential mortgage rate increased from 4.94% to 4.96% during the same period. These changes indicate a shift in lender strategies as they adapt to the evolving market.
Barclays has announced that it will raise rates on some mortgage products starting March 10, 2026. As of March 9, the average two-year fixed homeowner mortgage rate was recorded at 4.87%, with the average five-year fixed homeowner mortgage rate slightly higher at 4.98%. Other lenders, including HSBC and Nationwide, have also adjusted their fixed-rate offerings upwards, reflecting a collective response to the anticipated economic pressures.
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.” This prediction underscores the interconnectedness of global events and domestic financial conditions.
House prices have also shown signs of fluctuation, with a 0.3% increase in February 2026 following an 0.8% rise in January 2026. Such trends in the housing market may further complicate the decisions of potential homebuyers and those looking to refinance their mortgages.
Adam French, a housing market analyst, commented, “Mortgage rates had looked poised to fall ahead of an expected March base rate cut, but the escalation of conflict in Iran has abruptly shifted the mood and revived inflation fears.” This shift has left many borrowers uncertain about the future of mortgage rates and their ability to secure favorable terms.
Looking ahead, Alice Haine, a mortgage broker, mentioned, “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 the current landscape, but the overall outlook remains cautious as the situation develops.
