The UK’s mortgage market has been thrust into turmoil as the Middle East conflict reshapes global financial expectations, with average home loan rates breaking above 5% and hundreds of products vanishing from the market. Lenders across the country are repricing their offerings rapidly in response to escalating swap rates, driven by fears that the war involving the US, Israel, and Iran will push energy costs higher and reignite inflationary pressures. The abrupt change has left borrowers facing a suddenly more expensive landscape after months of improving conditions.
HSBC, Halifax, Barclays, and Nationwide were among the prominent institutions to have enacted rate increases, with HSBC implementing a second wave of hikes from Thursday. The speed of their response reflects the degree to which swap rate movements have made existing mortgage pricing unsustainable for lenders. Within 48 hours, close to 500 residential mortgage products were pulled from sale — a market contraction that Moneyfacts has described as the most severe since the immediate aftermath of the September 2022 mini-budget.
The data is stark: the average two-year fixed mortgage rate climbed to 5.01%, having sat at 4.84% before hostilities began — a return to levels last observed in the summer of 2024. The five-year rate reached 5.09%. Adam French of Moneyfacts acknowledged the severity of the episode while contextualising it against 2022, when 935 products — more than a quarter of the market — were withdrawn in a single day, a scale that the current withdrawal has not yet matched.
The broader economic stakes are high. Approximately 1.8 million fixed-rate mortgage agreements are scheduled to end in 2026, meaning a large portion of UK households will be navigating the remortgage process during a period of heightened uncertainty and rising costs. Just weeks ago, those borrowers could have reasonably expected to benefit from a steady stream of Bank of England rate reductions; that expectation has now been substantially revised.
The Bank of England’s March 19 meeting is widely forecast to result in a hold at 3.75%, having previously attracted an 80% probability of a rate cut. Across 2026 as a whole, the probability of any rate reduction has fallen to just 20%, down from 50% before the conflict escalated. As French put it, the future direction of mortgage rates in the UK is now almost entirely contingent on how the Middle East situation develops and what it means for inflation across global markets.