Mortgage Rates Rise as Middle East Conflict Drives Up Global Market Uncertainty
07 March 2026
The UK mortgage rates outlook has become more fragile after a sharp rise in geopolitical risk pushed up energy prices, unsettled bond markets and made lenders more cautious on fixed pricing. That does not mean every mortgage deal will move at once, and it does not mean the Bank of England has changed course overnight. But it does help explain why fixed mortgage rates can rise even when Bank Rate is unchanged, and why borrowers nearing a purchase or remortgage deadline may now be looking at a less comfortable pricing backdrop.
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What Is Moving UK Mortgage Pricing
In the first week of March 2026, markets sharply reduced expectations that the Bank of England would cut Bank Rate at its next meeting on 19 March. Reuters reported that markets had pared back the chance of a March cut to around 15%, down from roughly 75% a week earlier, as investors reassessed the inflation risk from the worsening conflict in the Middle East. For borrowers, that matters because fixed mortgage pricing is influenced less by the current Bank Rate itself and more by what markets think Bank Rate might do over the next few years.
That repricing also showed up in the gilt market. Reuters reported that Britain’s two-year gilt yield rose by 35 basis points over the week to 6 March, reaching its highest level since October. Short-dated gilt yields matter because they are part of the broader market backdrop that feeds into wholesale funding costs, swap pricing and lender appetite. When yields rise quickly, lenders often become more defensive until markets settle.
Why Energy Markets Matter More Than Many Borrowers Expect
The immediate concern is not simply that war is bad for sentiment. It is that an energy shock can push inflation higher again. Reuters reported that wholesale British gas prices had jumped by around 70% over the week as shipments through the Strait of Hormuz were halted and Qatar stopped production. The same report said Oxford Economics estimated UK inflation could be 0.4 percentage points higher if disruption through Hormuz lasts up to two months. That matters because higher energy costs can feed into transport, business costs and household expectations, making central banks more cautious about cutting rates.
This is where SONIA swap rates come in. In simple terms, SONIA swaps are market rates used to price and hedge future sterling interest-rate risk. Lenders commonly look at swap rates, especially in the two-year and five-year areas, when setting fixed mortgage prices. So when energy markets jump, inflation fears return and traders push back expected rate cuts, swap rates can move higher very quickly. That can feed through to fixed mortgage deals before any formal Bank Rate decision is made.
Why Fixed Deals Can Rise Before Bank Rate Moves
A common misunderstanding is that fixed mortgage rates should only move after the Bank of England changes Bank Rate. In practice, that is not how most fixed pricing works. Tracker mortgages and some variable rates are more directly linked to Bank Rate, subject to product terms. Fixed deals are more forward-looking. They reflect market expectations, lender funding costs, operational capacity, risk appetite and competition.
The Bank of England’s own February 2026 decision helps explain why markets were already focused on the path ahead rather than the current setting alone. At its meeting ending on 4 February 2026, the Monetary Policy Committee voted 5–4 to keep Bank Rate at 3.75%, with four members preferring a cut to 3.5%. The Bank also said that further easing was likely, but that the extent and timing would depend on how the inflation outlook evolved. That left room for markets to reprice quickly when a fresh inflation risk appeared.
For a broader explainer on the mechanics behind fixed pricing, read Mortgage One’s UK mortgage rate forecast hub. For related background on how calmer swap markets could help fixed rates ease again, see Are UK Mortgage Rates Heading Below 3.5% In 2026?.
What Lenders Are Changing Right Now
The market reaction is no longer theoretical. Mortgage Solutions reported on 6 March that Nationwide, Virgin Money and NatWest had increased mortgage rates in response to higher swap rates linked to the Middle East conflict. In Nationwide’s case, selected fixed rates rose by as much as 0.25%, while Virgin Money also increased selected products by up to 0.25% across purchase, remortgage and product transfer business.
A day earlier, Mortgage Solutions reported that Foundation planned to withdraw some buy-to-let products, Vida was pulling 11 buy-to-let deals, HSBC had announced increases to residential and buy-to-let rates up to 95% loan to value, and Coventry Building Society was set to raise pricing. The same report said that, as of 3 March, the two-year swap rate stood at 3.52% and the five-year swap rate at 3.65%, according to Chatham Financial. In other words, the repricing pressure was already visible across both mainstream and specialist parts of the market. Rates, fees, criteria and availability can change quickly and remain subject to eligibility, affordability and property checks.
What This Means for Remortgagers, Buyers and Landlords
For borrowers, the practical risk is timing. If you are close to the end of a deal, waiting for a slightly cheaper fixed rate can make sense when markets are calm and trending lower. It becomes harder to justify when lenders are repricing upward, withdrawing products or shortening the window between announcement and launch. A borrower who needs certainty for a purchase, a remortgage completion or a buy-to-let refinance may decide that securing an available deal is worth more than hoping for a better headline rate later.
Context also matters. Moneyfacts says the average two-year fixed mortgage rate had fallen to 4.83% at the start of 2026, while the average five-year fixed rate had dropped to 4.91%. So the bigger story before this latest shock was gradual easing, not a broad return to 2023-style stress. That is important because it suggests the current move is better understood as a setback in the path lower, rather than proof that the whole market has turned permanently upwards again.
This is also where personalised advice matters. Mortgage One, a qualified mortgage adviser and appointed representative of Quilter Financial Services Ltd, can help you weigh up the trade-off between securing a deal now and waiting for a market that may or may not settle in the way you expect. The right timing depends on your loan-to-value, product fees, property type, deal expiry date and how much payment certainty you need.
The UK Mortgage Rates Outlook From Here
The starting point for the UK mortgage rates outlook was improving before this geopolitical shock. The Office for National Statistics said CPI inflation was 3.0% in the 12 months to January 2026, down from 3.4% in December 2025. Core CPI was 3.1%, while CPI services inflation was 4.4%. That was still above target, but directionally it had been helping the case for lower rates over time.
Pay growth had also been easing. The Office for National Statistics said annual growth in employees’ average regular earnings was 4.2% in October to December 2025, the lowest rate since late 2021 to early 2022. Slower wage growth does not remove inflation risk, but it had been another sign that domestic price pressure might be cooling gradually.
The Bank of England’s February 2026 Monetary Policy Report had projected CPI inflation would fall to 2.1% in the second quarter of 2026, helped in part by lower household energy prices. The problem for borrowers is that a fresh global energy shock can disturb that path. If oil and gas prices settle back down quickly, some of the recent move in market rates could unwind. If the disruption lasts longer, lenders may stay cautious and the hoped-for glide path lower in fixed mortgage pricing could become slower and more uneven.
So the most balanced reading is this: fixed mortgage rates have risen in parts of the market because the conflict has changed expectations about inflation, future rate cuts and lender funding costs. That is not a guarantee that every lender will keep increasing rates, and it is not proof that borrowers should rush blindly into a product. But it is a reminder that mortgage pricing is shaped by global markets as well as domestic policy, and that sudden external shocks can change the mood very quickly.
Key numbers borrowers may want to watch:
Bank Rate: 3.75%, with the next Bank of England decision due on 19 March 2026
CPI inflation: 3.0% year-on-year in January 2026
Regular pay growth: 4.2% in October to December 2025
Average fixed rates at the start of 2026: 4.83% for two-year fixes and 4.91% for five-year fixes
Reported swap snapshot on 3 March 2026: 3.52% for two-year swaps and 3.65% for five-year swaps
Selected lender increases reported on 6 March 2026: up to 0.25% at Nationwide and Virgin Money
Figures as of 7 March 2026 London
The information provided in this article is for general guidance only and does not constitute personal or regulated financial advice. If you’d like to understand what these moves could mean for you, speak to Mortgage One. We can explain your options and timings based on your specific circumstances.
Some Buy to Let mortgages are not regulated by the Financial Conduct Authority.
FAQs
1. Why Do Fixed Mortgage Rates Change Before Bank Rate Moves?
Fixed mortgage rates are usually priced from forward-looking market rates, including swap rates, rather than today’s Bank Rate alone. If markets expect fewer cuts or higher inflation, fixed rates can rise first.
2. What Drives Fixed Mortgage Rates in the UK?
Key drivers include swap rates and mortgage pricing, Bank of England Bank Rate expectations, inflation, lender funding costs, operational capacity and competition.
3. Could Middle East Conflict Delay Lower Mortgage Rates?
It could. The main risk is that higher oil and gas prices keep inflation higher for longer, which may delay expected Bank Rate cuts and keep fixed pricing firmer.
4. Does A Higher Oil Price Automatically Mean My Mortgage Payment Rises?
No. Existing fixed-rate borrowers keep the same payment during their fixed term. The bigger effect is usually on new fixed deals, remortgages and product transfers if lenders reprice.
5. Should I Fix Now Or Wait?
That depends on your deadline, loan-to-value, fees and how much payment certainty you need. Waiting can work in calmer markets, but it carries risk when lenders are actively repricing.
6. Are Tracker Mortgages Affected In The Same Way?
Not usually. Trackers are more directly linked to Bank Rate, subject to product terms. Fixed deals are more sensitive to market expectations and swap rates.
7. Is This A Return To The Mortgage Market Stress Seen In 2023?
Not on current evidence. Average fixed rates had been easing into 2026, so this looks more like a setback in the downward path than a full return to the pressures seen in 2023.