Recent uncertainty in global politics, including the outbreak of the Iran conflict, has made financial markets, and consequently the UK mortgage market more unpredictable.
The Bank of England Base rate has been held at 3.75% by the Bank of England since December 2025. Expectations for interest rates and inflation have shifted, funding costs for banks have increased, and the outbreak of war involving Iran has pushed UK mortgage rates higher in the last month.
Whenever there is a more volatile economic environment, this volatility feeds into the cost of swap rates, which are the underlying costs lenders use to price fixed‑rate mortgages. As a result, with an increase in swap rates, some mortgage rates have increased since the conflict began, even though the Bank Rate itself hasn’t changed.
Mortgage rates remain well below the highs seen last year, however mortgage lenders are being understandably cautious in the current uncertain environment. Lenders are in an imposed ‘wait-and-see position’ since the Iran conflict. That will only shift with a period of consistent stability and markets responding positively to it.
The uncertain political backdrop will mean, inflation in the UK will be higher than expected, at least in the short term and the impact will be greater the longer the war and its effect on the global energy supply goes on.
Although the backdrop is challenging, there are still things you can do to help successfully manage your mortgage, with careful planning and flexibility. Nobody can say with certainty how long the impact of the Iran conflict on mortgage rates will last, or exactly where interest rates will go next, but prepare early to act on mortgage deals.
We are seeing large amounts of tracker rates being taken currently. As a result of the fixed rate pricing having risen, but with the base rate staying the same, tracker rates look competitive at the moment with the cheapest rates around 4%.
The closer we get to peace in the Middle East and global markets calm, the more the mortgage market will stabilise, and rates could even begin to edge lower. The expectation is for the rate changes to slow or pause rather than experience any sharp falls if we continue to move towards a resolution to the conflict.
The best scenario in all global interests is that there is a peace deal soon, and things recover some kind of normality.
Henry Knight Managing Director at Springtide Capital comments:
‘It is a very unpredictable global economic situation and it may take a while for things to stabilize completely. In the UK mortgage market, buying decisions need to be firmly based on current affordability rather than trying to second-guess where rates and the market might go next’
As global and economic concerns continue to influence the mortgage market, speak to one of our experienced team today to find the right solution for you.
Call us on 020 8154 7280 or email us info@springtidecapital.com
Sources:
US-Israel war with Iran | Latest News and Updates | BBC News
Interest rates and Bank Rate: our latest decision | Bank of England
https://www.mortgageable.co.uk/mortgages/history-of-mortgage-interest-rates/