(qlmbusinessnews.com . Mon 9th Mar, 2026) London, UK —
How the Middle East Crisis is Forcing British Lenders to Hike Mortgage Costs
British lenders have commenced the process of increasing their mortgage interest rates amidst concerns that the ongoing conflict in the Middle East might fuel inflation, potentially hindering further interest rate reductions by the Bank of England.
Nationwide Building Society has adjusted the rates on a selection of its offerings by as much as 0.25%, while both HSBC UK and Coventry Building Society have announced impending rate hikes.
These adjustments follow shifts in the financial markets' predictions regarding the Bank of England's future moves on interest rates.
David Hollingworth, an associate director at L&C Mortgages, suggested that while mortgage costs are not expected to soar dramatically, those pondering over securing a new fixed-rate deal should act “sooner rather than later”.
From Friday, Nationwide will apply rate changes to specific two, three, five, and ten-year fixed-rate mortgage products for all new applications. This change will affect a wide range of borrowers including first-time buyers, home movers, those remortgaging, and customers switching deals.
The determination of mortgage rates by lenders is significantly influenced by the so-called “swap rates”, a measure in the financial market that indicates the expected future direction of the Bank of England's base rates.
A Nationwide spokesperson mentioned that the society regularly reviews its mortgage rates. “In light of the recent global events leading to a notable increase in swap rates, like other lenders, we find ourselves in a position where we need to uplift our rates. However, our adjustments are modest compared to the surge in swap rates, and we continue to uphold our commitment to our existing clients through our pricing promise,” the spokesperson explained.
HSBC has revised its rates, increasing by between 0.10% and 0.25% for new customers and between 0.04% and 0.13% for existing customers, as confirmed by the bank.
Starting Monday, the Coventry Building Society will also see its rates ascend. “Given the recent movement in swap rates, we've had to realign some of our mortgage rates accordingly,” said a statement from the society. “Even with these increases, we remain dedicated to providing competitive mortgage options.”
Current data from Moneyfacts shows the average rate for two-year fixed mortgages has climbed to 4.84%, while the five-year fixed rate now stands at 4.96%.
Experts caution that persistent high prices for oil and gas, due in part to the Middle East conflict, could broadly escalate the cost of goods in the UK, which, in turn, would decelerate the Bank of England's rate reductions.
“The Middle East conflict has caused the market to anticipate higher inflation, potentially causing a slowdown or pause in rate cuts,” Hollinworth noted. “This inflates the cost for lenders when setting their fixed-rate mortgages, potentially driving rates up.”
Amanda Bryden, head of mortgages at Halifax, indicated that geopolitical uncertainties seem to be shaping inflation expectations and the Bank of England's response strategy. “Given these uncertainties, a more gradual approach to interest rate cuts is now expected,” she added.
Despite maintaining interest rates at 3.75% last month, the Bank of England's governor, Andrew Bailey, hinted at the possibility of “some further reduction” in rates this year. However, the Middle East conflict's impact and inflation concerns have cast doubt on this outlook.
The National Institute of Economic and Social Research earlier this week suggested that persistent high energy prices might compel the Bank of England to elevate interest rates above 4%.
The Bank's next interest rate announcement is scheduled for 19 March.
Karen Noye, a mortgage expert at Quilter, highlighted that changes by lenders were partly in response to a flood of applications spurred by previously lower rates before the conflict emerged. “Borrowers are now facing a more volatile landscape. Until the geopolitical risks stabilise and there's clarity that inflation won't surge again, mortgage rates are likely to fluctuate,” Noye remarked.
She advised borrowers to consider securing their rates well in advance, with many lenders offering the option to lock in a rate up to six months ahead, providing a safeguard with an opportunity to reassess nearer the end of a fixed term.
Adam French, head of consumer finance at Moneyfacts, also pointed out the broader implications of prolonged high inflation on households. “While prospective borrowers may find the delay in rate cuts unwelcome, the long-term impact of sustained inflation is significantly more detrimental,” he concluded.
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