Full Breakdown
Turbulence in the UK Mortgage Market Amid Middle East Conflict
3/12/2026, 11:25:42 AM
Rising Mortgage Rates and Product Withdrawals
The UK mortgage market is experiencing significant turbulence, with average rates for two-year fixed mortgages surpassing 5% for the first time since August 2025. This surge follows the onset of the US-Israel war with Iran, which has disrupted global oil prices and heightened inflation concerns. According to financial information service Moneyfacts, the average rate on two-year fixed deals rose from 4.84% to 5.01% within a week, while five-year fixed rates increased from 4.96% to 5.09%. In the past 48 hours alone, nearly 500 mortgage products have been withdrawn from the market, marking the most significant upheaval since the aftermath of the 2022 mini-Budget under former Prime Minister Liz Truss.
Impact of Global Events on Interest Rates
The conflict in the Middle East has led to rising oil prices, which in turn have influenced bond yields and mortgage rates. Analysts had previously anticipated potential interest rate cuts by the Bank of England, but these expectations have shifted dramatically due to the geopolitical situation. Adam French, head of consumer finance at Moneyfacts, noted that the current market conditions are "unwelcome news for borrowers," as the prospect of falling rates has quickly transitioned to rising ones. The uncertainty surrounding global markets and inflation expectations is expected to dictate the future trajectory of mortgage rates.
Official Statements and Market Reactions
Major lenders, including HSBC, Nationwide, and TSB, have responded to the changing financial landscape by increasing their mortgage rates. TSB, for instance, announced a 0.5% increase in its rates, following a previous hike of up to 0.15%. This pattern of rapid rate adjustments reflects lenders' reactions to fluctuating swap rates, which are critical in determining mortgage pricing. French emphasized that while the recent withdrawals of mortgage products are significant, they do not compare to the shock experienced in September 2022, when 935 products were pulled in a single day.
Criticism and Concerns from Experts
Mortgage brokers have expressed concerns that the ongoing conflict could lead to further increases in interest rates, potentially exacerbating the financial strain on borrowers. Rachel McGovern, Deputy Chief Executive of Brokers Ireland, warned that a prolonged war could trigger inflation spikes in the eurozone, prompting the European Central Bank to raise interest rates. This scenario could place additional pressure on mortgage borrowers, who may need to consider locking in fixed rates to shield themselves from future increases.
Conflicting Reports and Market Uncertainty
While the current situation has led to a significant withdrawal of mortgage products, some experts believe that many of these deals may return as lenders adjust their pricing strategies. However, the overall sentiment remains cautious, with many borrowers facing "payment shock" as they renew their mortgages amid rising costs. The unpredictability of the geopolitical landscape continues to complicate financial planning for households, making it increasingly challenging for them to navigate the mortgage market.
Verbatim Quotes
- “uk, said: “Recent days have been some of the most turbulent in the UK mortgage market since the aftermath of the September 2022 mini-budget.” — Adam French, Head of Consumer Finance at Moneyfacts
- “A prolonged war in the Middle East could lead to a substantial spike in euro zone inflation and the ECB could increase its interest rates to combat that, with many mortgage borrowers coming under pressure as a result.” — Rachel McGovern, Deputy Chief Executive of Brokers Ireland
- “How far they could go is now heavily dependent on how global markets and inflation expectations evolve as conflict in the Middle East unfolds.” — Adam French, Head of Consumer Finance at Moneyfacts
The current turmoil in the UK mortgage market underscores the interconnectedness of global events and local financial conditions, leaving borrowers in a precarious position as they navigate rising costs and limited options.
