Some mortgage lenders are putting planned rate cuts on hold as economic uncertainty grows following rising tensions in the Middle East. According to financial data provider Moneyfacts, swap rates used by lenders to price fixed mortgages have climbed sharply in recent days, prompting several lenders to rethink their pricing strategies.
Moneyfacts reported that a number of lenders, though unnamed, have already delayed or withdrawn planned reductions in mortgage rates. This comes as global markets react to escalating conflict involving Iran, which has pushed oil and gas prices higher and reignited concerns over inflation.
Despite this shift in sentiment, average residential mortgage rates continued to edge down slightly earlier this week. The typical two-year fixed homeowner mortgage slipped to 4.82%, while the average five-year fixed rate fell marginally to 4.94%. These small movements suggest that while overall rates have been trending down, momentum may now be slowing.
In contrast, buy-to-let mortgage products showed minor increases. The average two-year buy-to-let rate rose to 4.65%, and the five-year equivalent edged up to 5.05%, reflecting growing caution among lenders as funding costs increase.
Adam French, head of consumer finance at Moneyfacts, explained that higher swap rates are being driven by surging energy prices and renewed fears that inflation could rise again. He said this has led to higher gilt yields and a sudden shift in expectations around interest rate cuts from the Bank of England.
He warned that fixed-rate mortgage pricing is closely tied to swap rates, meaning market volatility can quickly affect the deals available to borrowers. Just as confidence had begun to improve ahead of a potential base rate cut, lenders are now becoming more cautious.
French added that mortgage costs are influenced not only by domestic policy decisions but also by global events. Geopolitical instability moves financial markets, which in turn shapes swap rates and ultimately mortgage pricing.
Martin Temple, an economist at Leeds Building Society, said financial markets have significantly reassessed the likelihood of a quarter-point base rate cut at the Bank’s next meeting. Rising swap rates, he noted, suggest mortgage rates for homebuyers and those remortgaging could increase in the short term.
However, Temple also pointed out that savers may benefit from the current climate, with the potential for more attractive savings rates as the ISA season approaches.
Jinesh Vohra, chief executive of Sprive, said markets had previously expected further rate cuts this year, but renewed geopolitical risks could complicate that outlook. Any disruption to global energy supplies or trade routes could feed into inflation and make policymakers more cautious about easing interest rates.
For homeowners, this uncertainty matters because expectations of falling rates have been helping to bring mortgage prices down. If inflation pressures return, those reductions could stall or even reverse.
Vohra added that while borrowers cannot control global events, they can take practical steps to protect themselves. For those who can afford it, making small voluntary mortgage overpayments can help reduce balances and limit exposure to future rate rises.
Overall, the situation highlights how quickly global developments can reshape the mortgage market. With swap rates rising and inflation fears returning, lenders are becoming more defensive, and borrowers may face a slower path to cheaper mortgage deals than previously hoped.
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