Full Breakdown
Impact of the Iran War on UK Mortgage Rates
3/18/2026, 11:49:36 AM
Rising Mortgage Costs Amid Conflict
The ongoing conflict in the Middle East, particularly the war involving Iran, has significantly impacted mortgage rates in the UK. Recent data from Moneyfacts indicates that homeowners taking out new mortgages are facing an average increase of £788 per year compared to pre-war levels. This surge is attributed to lenders raising rates and withdrawing mortgage products since the onset of US-Israel strikes on Iran in late February 2026. The average two-year fixed mortgage rate has escalated from 4.83% at the beginning of March to 5.28%, marking its highest point since April 2025. Similarly, the average five-year fixed rate has risen from 4.95% to 5.32% during the same period.
Market Response and Lender Actions
The financial landscape has seen a dramatic reduction in available mortgage products, with nearly 700 deals pulled from the market, representing a nearly 10% decrease. Major lenders, including Barclays, HSBC, NatWest, Nationwide, and Santander, have ceased offering fixed-rate deals below 4%. This contraction in options is reminiscent of the aftermath of the 2022 mini-budget delivered by then Chancellor Kwasi Kwarteng, which saw a quarter of mortgage deals withdrawn.
Adam French, head of consumer finance at Moneyfacts, noted that the current situation is a direct consequence of the economic uncertainty stemming from the conflict. He stated, “Choice continues to fall as lenders pull deals and reprice in response to rapidly rising funding costs.” The volatility in the market has led to predictions of further fluctuations in mortgage rates as the global economy adjusts to the implications of the war.
Implications for Homebuyers
The rising costs and reduced availability of mortgage products are particularly challenging for first-time buyers. Mary-Lou Press, president of the National Association of Estate Agents (NAEA), emphasized that even minor increases in mortgage rates can significantly affect borrowing capacity and monthly expenses. She remarked, “This shift highlights how sensitive mortgage rates are to wider economic uncertainty, making it harder for people to plan and potentially slowing activity across the housing market.”
Before the conflict, economists had anticipated potential cuts to UK interest rates in 2026. However, the surge in oil prices and inflation concerns have shifted expectations, with the Bank of England now likely to maintain its current rates. Financial experts are advising borrowers to consult with mortgage advisers to navigate the changing landscape effectively.
Conflicting Reports & Gaps
While the data from Moneyfacts provides a clear picture of rising mortgage costs, there is a lack of consensus on the long-term implications of these changes. Some analysts predict that if inflation continues to rise, interest rates may increase before the end of the year, while others remain uncertain about future market stability.
Verbatim Quotes
- “War in the Middle East has added almost £800 to a typical annual mortgage bill in just two weeks, which will be unwelcome news for anyone currently seeking a fixed-rate deal,” — Adam French, Head of Consumer Finance, Moneyfacts
- “This shift highlights how sensitive mortgage rates are to wider economic uncertainty, making it harder for people to plan and potentially slowing activity across the housing market,” — Mary-Lou Press, President, NAEA Propertymark
- “Borrowers may need to brace for further volatility in the weeks ahead as the global economy braces for a ‘Trumpflation’ wave flowing from the US- and Israel-led action in Iran.” — Adam French, Head of Consumer Finance, Moneyfacts
