(qlmbusinessnews.com . Thu 19th Mar, 2026) London, UK —
How the Iran Crisis and Soaring Oil Costs Could Impact Your Mortgage and Savings
The ongoing conflict in Iran is poised to significantly influence the Bank of England's impending decision on interest rates, with experts now anticipating the rates to remain unchanged.
In the period leading up to the discord, there had been widespread anticipation of a reduction in the benchmark rate during the upcoming meeting. However, market turmoil coupled with soaring oil prices have essentially dismissed the likelihood of any rate cuts.
The Bank's Monetary Policy Committee (MPC) is expected to maintain the key interest rate at 3.75%, a decision that directly affects borrowing costs for both individuals and corporations.
The future trajectory of interest rates remains cloaked in uncertainty, with analysts diverging on predictions. The potential for rate hikes down the line cannot be dismissed, should the conflict protract and trigger lasting economic repercussions.
The MPC is set to disclose its latest verdict at midday GMT.
Following a decrease in the inflation rate to 3% in January, forecasts had inclined towards a cut in interest rates. Moreover, the Bank rate was at its nadir since February 2023.
Initially, the Bank's rate-setters resolved to maintain the benchmark rate in early February by a narrow margin. Yet, this stance was quickly upended by the US-Israeli airstrikes on Iran, exerting immediate stresses on the UK and global economies.
A significant uptick in oil prices, largely due to disruptions in vital trade corridors like the Strait of Hormuz, looks set to drive up domestic energy costs alongside heating oil and petrol prices.
Experts predict this surge will exert upward pressure on the inflation rate, which had been on a trajectory towards the Bank's 2% goal.
With interest rates serving as the Bank's primary instrument to manage inflation, economic analysts now anticipate the MPC to hold rates steady to fully assess the price shock's magnitude and duration.
Mortage Rate Surge
The base rate of the Bank of England influences what commercial lenders charge their customers for mortgages and the interest rates for savings.
Both markets and lenders have anticipated the rate hold, while also adjusting to the broader economic uncertainty by withdrawing deals and hiking rates on new fixed agreements.
Data from financial information provider Moneyfacts shows a significant leap in the average two-year fixed mortgage rate from 4.83% in early March to 5.30%, marking a peak since the previous February. Similarly, the average five-year fixed rate has surged from 4.95% to 5.35%, reaching its highest since August 2024.
This escalation is expected to impact broader borrowing costs, including credit card and personal loan rates.
Tamsin Powell, a consumer finance analyst at Creditspring, remarked on the challenging times ahead for lower-income households, who had hoped for declining rates to alleviate pressures on constricted budgets. Instead, they now confront a protracted phase of high credit costs amidst rising expenses for essentials, limiting their capacity to handle unforeseen financial strains.
While stable interest rates might offer temporary relief to savers, according to Rachel Springall from Moneyfacts, the benefits are largely marginal with slight fluctuations in the average rates. She emphasised the need for market stability and encouragement for savers to fortify their financial reserves.
Springall highlighted that currently, approximately 60% of UK savings accounts yield returns below the Bank's 3.75% rate, underscoring the challenges for savers in this economic climate.
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