UK mortgage rates have surged dramatically in the seven weeks since the Iran conflict began influencing global oil markets, with the average two-year fixed deal rising from 4.83% on 1 March to 5.83% by 22 April — a full percentage point movement that translates into hundreds of pounds per month in additional costs for new buyers and remortgaging households. Brokers across London report clients shifting plans, postponing purchases, and in some cases withdrawing from agreed sales as the affordability calculations have changed materially.
How the repricing happened
Mortgage rates do not track the Bank of England Bank Rate directly. They follow swap rates — the wholesale prices at which banks can borrow money for fixed periods of two, five, or ten years — and those have moved in response to bond market repricing of inflation expectations. When the Iran conflict began affecting Middle Eastern oil supply in late February, gilt yields rose as investors anticipated higher inflation and a Bank of England that would cut rates more slowly than previously expected.
Two-year swap rates moved from approximately 4.0% in early March to 4.95% by mid-April. Lenders, who add a margin of approximately 0.7-1.0% to fund mortgage products, repriced their headline deals accordingly. The market leaders — Halifax, Nationwide, NatWest and Barclays — moved within days of each other, leaving very few competitive options below 5.5% for borrowers with anything less than the strongest credit profiles.
The London impact
For London buyers, the rate change is particularly painful because absolute mortgage values are larger. A typical first-time buyer in outer London, taking a £350,000 mortgage at 80% loan-to-value, would have paid approximately £1,830 per month on a 4.83% two-year fix in early March. The same purchase taken out in late April at 5.83% costs approximately £2,015 per month — an increase of £185 monthly, or £4,440 over the two-year term.
For higher-value buyers in inner boroughs, taking £600,000-plus mortgages, the absolute impact is correspondingly larger. A £600,000 mortgage at 5.83% versus 4.83% costs roughly £320 more per month — £7,680 across two years.
What is happening to existing borrowers
Households with fixed-rate deals expiring in the next 12 months face the most immediate impact. Approximately 1.6 million UK fixed-rate mortgages are scheduled to expire between May 2026 and April 2027. Many of these were taken out in 2021 and 2022 at rates between 1.5% and 2.5% — a doubling or tripling of monthly costs is now a near-certainty for most affected households.
Lenders are encouraging early remortgaging — typically up to six months before deal expiry — but this only locks in current rates rather than avoiding them. For households wanting to defer the impact, the only meaningful option is to switch to a tracker product, which will follow the Bank Rate down if the Bank of England resumes cutting later in 2026.
The trade-off: fix or float?
The standard advice from mortgage brokers has always been: fix when rates are uncertain, float when rates are clearly falling. The current moment is genuinely difficult to call. If the Iran conflict resolves within months and oil prices fall, the Bank of England could resume cutting through 2026 and 2027, making a tracker the better choice. If, conversely, the conflict persists and inflation pressures embed, fixed rates may need to rise further before falling.
Industry consensus is that two-year fixes currently offer the best balance of certainty and flexibility, accepting the higher headline rate in exchange for the option to remortgage in 2028 if conditions improve. Five-year fixes, while marginally cheaper at around 4.7-5.2%, carry the risk of locking in elevated rates if the broader cycle ultimately moves lower.
Effect on the housing market
The mortgage rate jump has, predictably, affected transaction volumes. London property portals report that April 2026 saw a 12% decline in agreed sales compared with March, and a 22% decline compared with April 2025. Estate agents are advising sellers to reduce asking prices by 3-5% to maintain transaction velocity, particularly in the £400,000-£700,000 mid-market segment where buyer affordability is most squeezed.
Knight Frank’s most recent research suggests prime central London — the £2 million-plus segment — has been less affected, as cash buyers and overseas investors are not directly exposed to mortgage rate movements. The mid-market, however, is bearing the full brunt of the change.
Looking forward
The trajectory of mortgage rates from here depends almost entirely on three factors: the duration of the Iran conflict, the path of UK inflation through the summer, and the Bank of England’s next decision on 18 June. Should any of these resolve positively — particularly a partial reopening of the Strait of Hormuz — rates could fall back toward 5.0-5.3% within weeks. Should they not, the current 5.8% level may prove a floor rather than a ceiling.
For households facing remortgage decisions in the next 90 days, the unhelpful but accurate advice is: take expert advice, and don’t try to time the market.
— Sarah Mitchell, London Capital Post
