Current Trends in Mortgage Rates Amid Rising Inflation
Prior to the outbreak of war, mortgage rates had largely been expected to continue on a downward trend in the UK this year. However, recent geopolitical events, particularly the escalation of conflict in Iran, have shifted expectations significantly. The Bank of England is now unlikely to cut interest rates due to rising inflation fears, which have been exacerbated by the ongoing situation in the Middle East.
In response to these changing economic conditions, major UK lenders have begun to increase mortgage rates. The average two-year fixed residential mortgage rate rose from 4.82% to 4.84% between March 4 and March 9, 2026. Similarly, the average five-year fixed residential mortgage rate increased from 4.94% to 4.96% during the same period.
Barclays has announced that it will raise rates on some mortgage products starting March 10, 2026. As of March 9, 2026, the average two-year fixed homeowner mortgage rate stood at 4.87%, while the average five-year fixed homeowner mortgage rate was 4.98%. Other lenders, including HSBC and Nationwide, have also adjusted their fixed-rate offerings upwards, reflecting a broader trend in the market.
Market analysts are now pricing in the possibility of only one rate cut for the entirety of this year, with the likelihood of an interest rate rise before the end of the year estimated at 70%. This shift in sentiment has raised concerns among potential homebuyers and those looking to refinance their mortgages.
Ben Perks, an economic analyst, commented on the situation, stating, “When Trump dropped his first bomb on Iran, it blew up all hope of a rate reduction this month.” This sentiment is echoed by Mike Staton, who noted, “Yes, inflation is likely to tick up again with energy and fuel prices rising due to global conflict.” Such statements highlight the direct correlation between geopolitical events and domestic economic conditions.
Adam French, another expert in the field, remarked, “Mortgage rates had looked poised to fall ahead of an expected March base rate cut, but the escalation of conflict in Iran has abruptly shifted the mood and revived inflation fears.” This indicates that the current trajectory of mortgage rates is closely tied to international events, which are causing uncertainty in the housing market.
Despite the rising rates, there may still be opportunities for borrowers. Alice Haine, a mortgage broker, explained, “If the Middle East conflict proves short-lived and mortgage rates ease again, brokers can often switch borrowers to a better rate on their product right up until two weeks before their mortgage term starts.” This suggests that while the immediate outlook may be challenging, there could be flexibility for borrowers in the future.
As the situation develops, observers are closely monitoring the impact of these changes on the housing market. House prices rose by 0.3% in February 2026, following an 0.8% increase in January 2026, indicating that demand may still be strong despite rising mortgage rates. However, the long-term effects of inflation and interest rate adjustments remain to be seen.