The mechanism behind the recent spike in UK mortgage rates is becoming clear as “swap rates”—the financial instruments lenders use to price fixed deals—react to the war in Iran. The uncertainty surrounding global energy supplies has caused these rates to climb, leading to an average £800-a-year increase for new borrowers. Moneyfacts reports that the market is in its most turbulent state in years.
In just two weeks, the number of mortgage deals available to the public has shrunk significantly, with 700 products pulled from the shelves. The average two-year fix is now at 5.28%, a level last seen in April 2025. This rapid repricing is a direct response to “Trumpflation,” the term coined for the inflationary pressures resulting from U.S. military action in the Middle East.
The impact is most visible in the disappearance of low-interest deals. Only nine fixed-rate products under 4% remain, a sharp decline from 490 at the start of last week. This means that even the most credit-worthy borrowers are seeing their potential monthly payments rise substantially. On a typical £250,000 loan, a two-year fix is now £788 more expensive annually.
This shift has major implications for the Bank of England’s Monetary Policy Committee. Previously, the Bank was expected to lower interest rates to 3.5% this week. However, the surge in oil and gas prices has created an “inflationary trap,” making a rate cut too risky. Analysts now expect the Bank to hold rates at 3.75% to gauge the long-term impact of the war.
As the global economy braces for the next wave of the conflict, UK borrowers are being left with the bill. Adam French from Moneyfacts notes that “choice continues to fall” as lenders struggle with rising funding costs. For the 1.8 million people remortgaging in 2026, the era of predictable, falling rates has been replaced by a new era of geopolitical volatility.