(qlmbusinessnews.com . Wed 18th Mar, 2026) London, UK —
How the US-Israeli Strikes on Iran Trigger Rising Mortgage Rates in the UK
The cost of taking out a typical mortgage in the UK has surged by £788 annually following the onset of the Iran conflict, according to the latest figures.
Homebuyers and existing homeowners looking to lock in a £250,000 mortgage over 25 years, with the current average two-year fixed rate of 5.28%, will encounter these increased costs.
Data from Moneyfacts, a provider of financial information, highlights a rise in mortgage rates and a reduction in available deals since the US-Israeli strikes on Iran at the end of February.
As a result of these geopolitical tensions, major lenders have withdrawn their most competitive mortgage offers below 4%, although mortgage brokers advise that there are still ways to navigate the uncertainty. They recommend careful planning well ahead of any mortgage deal's expiration.
Mortgages with fixed interest rates offer the security of unchanged payments until the end of the agreement period, typically after two or five years, at which point a new deal must be sought. In contrast, variable rates, such as trackers, fluctuate with the Bank of England’s benchmark interest rate. The Bank's rate decision is expected later this week, adding to the anticipation.
Since early March, the average rate for a two-year fixed mortgage has climbed from 4.83% to 5.28%, the highest since last April according to Moneyfacts. For those seeking a longer-term solution, the average rate on a five-year deal has increased from 4.95% to 5.32%, marking its peak since February of the previous year. This means a five-year fixed mortgage is now £651 costlier than just two weeks earlier.
Adam French, head of consumer finance at Moneyfacts, anticipates further market fluctuations as the global economy adjusts to the repercussions of the conflict in Iran, coining the term ‘Trumpflation' to describe the anticipated inflationary impact.
The aftermath of these geopolitical events has seen a reduction of almost a tenth in the number of mortgage products available, a decrease of 689 since 9 March. However, this pales in comparison to the market shock following the Liz Truss mini-Budget, which saw a quarter of mortgage deals withdrawn.
The withdrawal of sub-4% mortgage rates has been particularly concerning for first-time buyers, notes Mary-Lou Press, president of NAEA Propertymark. She points out the vulnerability of mortgage rates to external economic pressures and the potential slowdown in housing market activities.
The change underscores the significant impact even minor rate increases can have on borrowers' affordability and monthly expenses, emphasizing the need for market stability.
With the Bank of England's interest rate decisions heavily influenced by market and economic indicators, previous forecasts of rate cuts have been overturned by concerns over inflation, driven by rising oil prices amid the conflict.
Those in the mortgage market are encouraged to consult with advisors, who can offer reassurance and guidance through the current uncertainty, according to Jo Jingree of Mortgage Confidence.
As the situation evolves, individuals looking to understand how changes might affect their mortgage costs can utilise calculators and seek tailored advice to navigate these challenging times.
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