UK mortgage rates have climbed back to levels seen approximately one month earlier, driven by renewed geopolitical tensions in the Middle East that have shifted market expectations regarding future interest rate policy.
Market participants have reassessed the likelihood of central bank interest rate cuts following escalations in regional conflict, including fresh strikes and attacks by Houthi militia on oil tankers in the Red Sea. These developments have raised concerns about global energy supply stability. Oil prices surged to $100 per barrel on Thursday, marking the highest level since May, amid several days of price increases. This rally has intensified inflation concerns and reduced the probability that major central banks will pursue rate reductions in the near term.
The five major High Street banks have joined numerous other lenders in raising rates on new fixed-rate mortgage products in recent days. According to Moneyfacts, the average rate on a two-year fixed deal stands at 5.59%, the highest since 19 June, though still below the 5.9% peak recorded in April. Five-year fixed deals are averaging 5.61%, matching levels last observed on 7 June. HSBC announced plans to raise its mortgage rates on Monday.
The rate movements come after an extended period of declining rates in June and early July had generated optimism among borrowers. Bank of England projections indicate that more than five million homeowners should anticipate increased monthly mortgage payments by the end of 2028. Over 80 percent of mortgage customers currently hold fixed-rate deals that protect them from immediate payment changes until their agreements expire, typically after two or five years.
Industry analysts cautioned that momentum has shifted toward rising rates in the near term. Financial experts recommended that borrowers needing to remortgage this year consider locking in new deals promptly with their current lenders while exploring alternatives through mortgage brokers. Approximately 100 mortgage deals were temporarily withdrawn as lenders reassessed their pricing strategies amid market volatility.
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