UK Mortgage Rates Rising — How the Iran War Is Hitting Your Home Loan

Updated April 2026 | Kaeltripton.com

Since the US-Israel military strikes against Iran began on 28 February 2026, UK mortgage rates have risen sharply. Over 1,500 mortgage products have been withdrawn from the market, and major lenders including HSBC, NatWest, Nationwide and Halifax have all increased their fixed rates. Here is exactly what has happened, why, and what you should do now.

Why Is a War in the Middle East Affecting UK Mortgages?

The conflict has disrupted the Strait of Hormuz — a narrow shipping lane through which around 20% of the world's oil supply passes. Iran closed the strait on 2 March 2026, triggering the largest energy supply disruption in recorded history. This has pushed Brent crude above $100 per barrel and sent UK inflation expectations sharply higher.

Higher expected inflation makes Bank of England interest rate cuts less likely — and potentially means rate rises. When lenders price fixed mortgages, they use "swap rates" — market expectations of future interest rates. Swap rates surged from multi-year lows in February to multi-month highs within days of the conflict starting. Lenders responded by pulling deals and repricing upwards.

How Much More Are Borrowers Paying?

The Bank of England estimates that around 5.2 million UK mortgage holders could face increased repayments by end of 2028 — up from a previous estimate of 3.9 million before the conflict began. Around 1.3 million homeowners face a jump in payments specifically due to the war's impact.

What Major Lenders Have Done

HSBC: Two-year fix moved to 5.17% (was 4.57%). Now offers 5.99% on 95% LTV products.

NatWest: Fixed rates increased across the board following swap rate rises.

Nationwide: Five-year fix at 5.63% (was 5.32%).

Halifax: Increased five-year fix but cut two-year deal slightly.

Barclays: The only major lender to hold rates in the most recent round of changes.

What Will the Bank of England Do on 30 April?

The April 30 MPC meeting is critical. Around 90% of economists surveyed expect the Bank to hold rates at 3.75%. However, JP Morgan predicts one rate rise by June 2026. The National Institute of Economic and Social Research warns rates could reach 4.5% if oil prices remain elevated for a year.

Three scenarios from Oxford Economics and ING:

Best case: Oil returns to $70-75 by May. BoE cuts in Q2/Q3. Two-year fixes fall back toward 4.5-4.75%.

Base case: Oil stays $85-100 through Q2. BoE holds all year. Mortgage rates stabilise at 5.0-5.5%.

Worst case: Strait of Hormuz remains blocked. Inflation hits 4%+. BoE forced to hike. Mortgage rates rise further.

What Should You Do Now?

If your fix is expiring in the next 6 months: Lock in a rate now. Most brokers allow you to secure a deal up to 6 months ahead and switch to a better rate if one becomes available. Given the uncertainty, locking in at current rates provides a ceiling on costs.

If you are a first-time buyer: Buyer demand has softened — particularly in London and the South East — giving you more negotiating power on price. However, deposit savings are more valuable now with higher rates, so ensure you maximise your deposit before applying.

If you are on a tracker or variable rate: You are directly exposed to any BoE rate rises. Consider whether a fix makes sense now. Compare current fixed and tracker rates using our UK mortgage calculator.

This article is for informational purposes only and does not constitute financial advice. Always verify rates with official sources before making any financial decision.

Frequently Asked Questions

Q: Why are UK mortgage rates rising in 2026?
The Iran war has pushed oil prices above $100/barrel, raising UK inflation expectations and making Bank of England rate cuts less likely. Lenders have responded by repricing fixed mortgage rates upward.

Q: What is the current average UK mortgage rate?
As of April 2026, the average 2-year fixed rate is around 5.84% and the average 5-year fixed rate is around 5.75% for a 75% LTV mortgage.

Q: Will mortgage rates go down in 2026?
It depends on the conflict. Best case: rates fall back to 4.5-4.75% if oil stabilises. Base case: rates stay at 5-5.5% all year. Worst case: rates rise further if the Strait of Hormuz stays closed.

Q: Should I fix my mortgage now?
If your deal expires in the next 6 months, most brokers recommend locking in a rate now and switching if rates fall later. Given current uncertainty, a fix provides a cost ceiling.