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 significantly altered the economic landscape, leading to rising inflation fears that are now impacting mortgage rates across the country.
The Bank of England is unlikely to cut interest rates due to these inflationary pressures. As Ben Perks noted, “When Trump dropped his first bomb on Iran, it blew up all hope of a rate reduction this month.” This sentiment is echoed by Mike Staton, who stated, “Yes, inflation is likely to tick up again with energy and fuel prices rising due to global conflict.” These statements underscore the growing concern among financial experts regarding the stability of interest rates.
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. Similarly, the average five-year fixed residential mortgage rate increased from 4.94% to 4.96% during the same period. This upward trend reflects the shifting expectations surrounding interest rates and the broader economic environment.
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%. Other 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 whole of this year, with the likelihood of an interest rate rise before the end of the year now at 70%. This shift in expectations has left many potential homebuyers and homeowners reassessing their mortgage options in light of the changing rates.
House prices have also been affected, with a reported increase of 0.3% in February 2026 following an 0.8% rise in January 2026. The escalation of conflict in Iran has revived inflation fears, further complicating the housing market dynamics. Adam French remarked, “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.”
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 the current landscape of rising mortgage rates.
As the situation continues to evolve, the implications for mortgage rates and the broader housing market remain to be seen. Observers will be closely monitoring the developments in Iran and their potential impact on inflation and interest rates in the UK.