The average rate on a new two-year fixed mortgage has climbed back to 5.59% — the highest since 19 June — as renewed tensions in the Middle East feed through to homeowners. Lenders' funding costs have risen because markets judge that a prolonged conflict reduces the chance of interest rate cuts by central banks.
Oil prices hit $100 a barrel for the first time since May on Thursday, stoking fears of higher inflation and a lower likelihood of rate cuts. Fresh strikes and Houthi militia attacks on oil tankers in the Red Sea reignited concerns over global energy supplies, reversing the recent ceasefire-driven fall in mortgage rates.
“Mortgage rates rise to 5.59% as Middle East tensions push up borrowing costs.”
Rachel Springall, finance expert at Moneyfacts, said: “It will be incredibly frustrating for borrowers to see rates rise back up to where they were a month ago. The positive progress over recent weeks now feels all but lost, but what the market needs is a period of stability.” She noted that 100 deals had been pulled temporarily as lenders reconsider their pricing plans.
The average rate on a five-year fixed deal now stands at 5.61%, a level last seen on 7 June. HSBC has announced it will raise its mortgage rates on Monday. More than eight in 10 mortgage customers hold fixed-rate deals; their payments do not change until the deal expires, usually after two or five years.
Recent projections by the Bank of England suggest just over five million homeowners should expect their monthly mortgage repayments to increase by the end of 2028. Springall advised anyone who needs to remortgage this year to lock in a new deal with their existing lender ahead of time.
Although the current two-year fixed rate remains below the Iran war peak in April of 5.9%, the upward trajectory has erased weeks of progress — and with oil above $100 and geopolitical risks unresolved, borrowers face an uncertain path forward.