How the War in Iran Is Affecting UK Mortgage Rates in 2026
- 5 hours ago
- 7 min read
A lot has changed very quickly for UK mortgage borrowers over the past six weeks. Since the US and Israel launched military strikes against Iran on 28 February 2026, mortgage rates have jumped, hundreds of products have been pulled from the market and the Bank of England rate cuts that everyone was expecting have been put on hold. If you are coming to the end of a fixed-rate deal, thinking about remortgaging, or trying to buy a home right now, this guide explains what is happening and what we think you should do about it.
What Has Actually Happened?
On 28 February 2026, US and Israeli forces launched military strikes against Iran. Global financial markets reacted within days. Oil prices surged close to 60% in the first week, going from around £57 per barrel to over £90. Iran then announced the closure of the Strait of Hormuz on 2 March, a waterway that carries around 20% of the world's oil supply. It was the largest energy supply disruption in recorded history.
For UK mortgage borrowers, the knock-on effect was rapid. Lenders price their fixed-rate mortgages off something called swap rates, which reflect where financial markets expect interest rates to go. When oil prices spiked and inflation fears returned, swap rates jumped. Lenders responded by repricing their deals upward and pulling products from sale.
Within 11 days of the conflict starting, over 1,500 mortgage products had been withdrawn across the UK market. By mid-March, the average two-year fixed rate had risen from around 4.8% to just over 5%, with some lenders pushing rates to 5.5% and above. That is an increase of roughly £90 a month on a £200,000 mortgage, or close to £1,000 a year.
The Bank of England held the base rate at 3.75% at its March meeting when a cut had previously been expected. The next meeting is on 30 April 2026. If the conflict is ongoing by then, economists believe the Bank may raise rates rather than cut them.
Why Does a War in the Middle East Affect My Mortgage?
It is a fair question. Fighting thousands of miles away might seem unconnected to your monthly payment, but the link is quite direct.
The UK imports around 44% of its energy, which makes it particularly exposed to global oil and gas price shocks. When energy prices rise sharply, inflation follows. When inflation rises, the Bank of England comes under pressure to keep interest rates higher for longer, or even raise them. And when rate cut expectations disappear, the swap rates that lenders use to price fixed-rate mortgages go up with them.
There is also the wider economic picture. UK growth forecasts have already been cut, with Oxford Economics and KPMG now expecting GDP growth of well under 1% in 2026. A slower economy with higher inflation is a difficult environment for borrowers, and it is showing up in the mortgage market right now.
Even with recent increases, rates are still lower than they were through much of 2023 and 2024. If you have a reasonable deposit or good equity in your home, competitive deals are still available. The window may not stay open for long, though. Get in touch, and we will check what is available for your situation today.
What Are the Three Possible Scenarios from Here?
Economists from Oxford Economics and ING have outlined three broad ways this could play out over the coming months.
Best case
The conflict de-escalates, oil prices fall back toward £55 to £60 per barrel by May, and the Bank of England resumes cutting rates in the second or third quarter of 2026. In this scenario, the average two-year fixed rate could drift back toward 4.5% by the autumn. If you are coming off a deal later in the year, this would mean more choice and lower costs.
Base case
Oil stays elevated, somewhere between £65 and £80 per barrel, through the second quarter. The Bank of England holds rates for the rest of the year. Mortgage rates stabilise around 5% to 5.5%, and product choice stays limited but gradually improves. This is what most forecasters currently consider the most likely outcome.
Worst case
The Strait of Hormuz remains blocked for an extended period, energy prices stay high, inflation climbs further, and the Bank of England raises rates before the end of 2026. This would push fixed-rate mortgage pricing higher still and could cause real difficulty for anyone coming off a deal in the second half of the year.
Around one million fixed-rate mortgage deals are due to expire between April and September 2026, according to the Financial Conduct Authority. If yours is one of them, the next section matters.
What Should You Do If Your Fixed Rate Is Ending?
This is the question we are getting asked most at the moment, and the honest answer is: do not wait and see.
In a normal market, you might sit back and watch whether rates improve before committing to anything. Right now, waiting is a gamble. Products are being repriced upward and withdrawn with very little notice. What is available today may not be there next week.
Find out exactly when your current fixed rate ends. Check your mortgage statement or log into your lender's online account.
Contact us so we can check what rates are available across the whole market right now. As a whole market broker, we have access to over 100 lenders, not just the deals your existing lender is offering.
Lock in a rate as soon as you find something that works. Most lenders hold an offer for three to six months, so even if your deal does not expire until the autumn, you can secure something now and benefit from today's pricing.
If your current lender offers a product transfer, we can check whether that is competitive versus moving to a new lender. Sometimes staying put is the right call, sometimes it is not. We will tell you honestly either way.
Already locked in a rate before the end of February 2026? You are in a good position. Check with us that the offer is still current and what your options are if you want to review it before it completes. Read more about remortgaging here.
What If You Are Trying to Buy a Home Right Now?
The picture for buyers is more complicated but not as bleak as some headlines suggest. Rates have risen, but they are still lower than they were through much of 2023 and the first half of 2024. For buyers with a decent deposit, deals are still available, and lenders are still lending.
If you are a first-time buyer, the most important thing you can do right now is get a mortgage in principle in place. This costs nothing and means you can move quickly when you find a property, without the risk of rates moving against you while you are still searching.
If you are moving home and already have an offer accepted, speak to us immediately. We can lock in a rate before any further market changes happen. The longer you leave it, the more exposed you are to another repricing.
If your deposit situation is not quite there yet, it is worth looking at options like shared ownership or understanding how a gifted deposit could work for you. These routes are less affected by rate volatility than standard purchases.
What About Buy-to-Let Landlords?
If you have a buy-to-let mortgage coming to the end of its fixed rate, the same advice applies. Act now rather than waiting to see if things improve. A product transfer with your existing lender is often the quickest route in a volatile market because it does not require a full affordability reassessment and can usually be sorted within a few working days.
If you hold properties in a limited company, or you have an HMO mortgage coming up for renewal, get in touch, and we will confirm your options. The market is moving quickly, and specialist landlord products are among those being withdrawn and repriced most frequently.
If you have a BM Solutions mortgage or a TML mortgage with a fixed rate ending soon, both lenders are intermediary only, which means you need a broker to arrange the switch. We can handle both for you at no cost.
What About Self-Employed Borrowers?
If you are self-employed, the current market makes it more important than ever to use a broker rather than going directly to a lender. With product availability changing rapidly, knowing which lenders are still actively offering competitive deals for your income type requires live market knowledge that only a whole-of-market broker can provide.
Some lenders have tightened their self-employed criteria in response to the economic uncertainty caused by the conflict. Others have not. We know which is which, and we deal with self-employed mortgage applications every single week. We also help people with adverse credit and more complex income situations, so if your circumstances have changed since you last took out a mortgage, do not assume you are stuck.
Our View as Your Mortgage Broker
We have been through periods of rapid rate change before. The mini budget in September 2022 triggered a similar level of market disruption, and the sharp rises through 2023 tested a lot of borrowers. What we have learned from both of those periods is that trying to time the market is usually a losing game.
The variables that move mortgage rates, oil prices, geopolitics, inflation, and central bank decisions are genuinely unpredictable. The cost of waiting is not zero, and in a market this volatile, the cost of being caught out can be high.
Our advice to clients right now is straightforward:
If your deal is ending in the next six months, start looking now, not later
If you are buying, get a mortgage in principle in place as soon as you can
Do not assume rates will fall back quickly. The base case scenario suggests they stay elevated through most of 2026
Use a whole of market broker who can see every available deal, not just one lender's range
Check that your life insurance and income protection are still right for your situation. Higher mortgage costs make protection more important, not less.
We help clients in Oxford, Bicester, Banbury and right across the UK. If you want to talk through your situation, call us on 0330 1330034, visit our remortgage page, or read through our mortgage FAQs for more information.
This post will be updated as the situation develops. Last updated April 2026. For our view on whether to fix or go tracker right now, read our guide: Should You Fix Your Mortgage in 2026?
Comments