In short: The HomeOwners Alliance reported on 18 May that average UK mortgage rates have started to fall after the sharp spike that followed the outbreak of the Iran war earlier this year. The Bank of England held its base rate at 3.75% on 30 April, with the next Monetary Policy Committee decision scheduled for 18 June. Brokers caution that political uncertainty around the Starmer leadership question may slow or reverse the recent declines.
British borrowers have received a small but welcome piece of news this morning, with several major lenders trimming their fixed-rate mortgage offerings as the panic that followed February’s escalation in the Middle East begins to subside. The HomeOwners Alliance, citing data from L&C Mortgages, confirmed on Monday that average fixed deals have come down from their early-May peaks, though they remain materially above the levels seen at the start of 2026.
The pattern through this year tells the story of a market whipsawed by external shocks. According to Moneyfacts data widely cited by MoneyWeek and Rightmove, the average two-year fixed rate rose from 4.83% at the start of March to 5.67% by 8 May, while the five-year fix moved from 4.95% to 5.69% over the same period. Those increases reflected swap rates — the wholesale instruments banks use to fund their mortgage books — repricing rapidly in response to higher oil prices and renewed inflation expectations.
The Bank of England’s holding pattern
The Monetary Policy Committee held the base rate at 3.75% on 30 April, against a backdrop of CPI inflation running at 3% — a full percentage point above the Bank’s target. The next decision is due on 18 June, the same day as the Makerfield by-election expected to launch Andy Burnham’s parliamentary career. Financial markets, which entered the year pricing in further rate cuts, are now positioned for between two and three quarter-point increases before the end of 2026.
That repricing has consequences for the mortgage market that go well beyond headline rates. “Life is likely to get even tougher for sellers in the coming months, as mortgage rates threaten to keep rising and sentiment cools,” said Sarah Coles of AJ Bell, quoted by analysts tracking the Royal Institution of Chartered Surveyors’ April survey. The RICS measure of new buyer enquiries fell to a net balance of minus 39% in March, the weakest reading since August 2023.
Brokers urge caution
For all the relief evident in this week’s pricing sheets, mortgage advisers are warning customers not to interpret the move as the start of a sustained downward trend. David Hollingworth, associate director at broker L&C Mortgages, told MoneyWeek earlier this month that “no one will be surprised to see the impact of the Iran conflict feeding into a higher rate of inflation, driven largely by the increase in the cost of oil.” Until the war ends decisively, swap rates and therefore mortgage pricing remain hostage to events in the Strait of Hormuz.
Political risk has been added to the mix. The HomeOwners Alliance noted explicitly on Monday that speculation over whether the Prime Minister will face a leadership challenge “is adding political uncertainty into the mix.” A more left-leaning successor advocating EU re-entry, or a fiscal loosening to shore up internal support, would both push gilt yields higher and feed through to mortgage costs within days.
Affordability still the central problem
Even at today’s slightly lower headline rates, the affordability picture for first-time buyers in London remains formidable. Average UK property values stand at roughly £290,000 nationally according to the latest ONS figures, with London running well above that level. A two-year fix at 5.67% on a typical London mortgage produces a monthly commitment that an increasing share of dual-income households are simply unable to service at current wage levels.
The Rightmove monthly figures for May illustrate how the picture varies by region. A first-time buyer property outside London now costs an average of £226,955, with the typical monthly repayment on a two-year fix at 80% loan-to-value running at £1,038 — up from £975 in February but down from £1,062 in January 2025. The gap between those figures will widen or narrow depending almost entirely on what happens in Tehran and Westminster over the coming weeks.
For now, the message from brokers to clients is the same one they have been delivering for months: lock in if you can, and do not assume that this week’s small reduction marks the bottom.
