It’s been a big week for anyone keeping an eye on their monthly outgoings. Just as we were starting to see some much-needed calm in the housing market, the escalating conflict in Iran has sent a wave through the global economy, and unfortunately, our mortgage rates are feeling the brunt of it. It’s a frustrating turn of events for homeowners who were finally starting to breathe a sigh of relief.
The reality is changing fast. Over the last few days, we’ve seen hundreds of mortgage products pulled from the shelves as lenders react to the sudden volatility in oil prices and “swap rates” (the wholesale cost of borrowing) While we were all hoping for the Bank of England to signal more rate cuts this spring, the tension has forced a bit of a defensive pivot. Major lenders like NatWest and Barclays have already nudged their rates upward, pushing many two-year fixed deals back over that psychological 5% barrier.
There is a lot going on, especially when the news feels so relentless. Understanding how global events, like a conflict thousands of miles away, end up hitting our bank accounts isn’t always straightforward.
I’ve been talking through the latest TSB rate rises in the Telegraph here, where I break down what this means for the UK economy in the long run.
If your fixed-rate deal is coming to an end in the next six months, the best advice right now is to stay proactive rather than waiting for the dust to settle. The market is currently moving on headlines and uncertainty, so securing a rate through a broker sooner rather than later might offer some peace of mind, as we will continue to monitor the situation closely and adjust your mortgage rate if needed.
1. Why is a conflict in Iran affecting my UK mortgage?
It’s all about energy and inflation. Iran is a major oil producer; conflict there spikes global oil prices, which pushes up UK inflation. To fight this, the Bank of England is less likely to cut interest rates, and lenders raise mortgage prices to match the rising cost of living.
2. What are “swap rates,” and why do they matter?
Swap rates are essentially the “wholesale” price lenders pay for the money they lend to you. Because of the current global uncertainty, these rates have jumped. When it costs banks more to borrow, they pass that cost on by increasing fixed-rate deals.
3. My deal is ending soon, should I wait for things to settle?
Waiting is currently a gamble. Most lenders allow you to secure a new rate up to six months in advance. If rates drop later, we can usually switch you to the cheaper deal, but locking one in now protects you if the conflict keeps pushing rates higher.
4. Will my monthly payments go up immediately?
Only if you are on a Standard Variable Rate (SVR) or a tracker mortgage. If you’re on a fixed-rate deal, your payments won’t change until your current term ends. The goal is to have your next deal lined up before that.
5. Is this another 2022-style market meltdown?
Not quite. While nearly 500 products were pulled this week, reminiscent of the 2022 mini-budget, analysts see this as a “repricing” rather than a total collapse. Banks are more stable now, but the era of very cheap 3% deals is likely on hold while the conflict continues.