British homeowners and prospective buyers are facing a fresh financial shock after average mortgage rates climbed above 5%, driven by growing instability in global markets linked to the ongoing Middle East conflict. The surge has prompted lenders across the country to rapidly revise their product offerings, triggering one of the most volatile periods the UK home loan sector has seen in years. The speed of the change has caught many borrowers off guard, particularly those who had been counting on continued rate reductions throughout 2026.
Major high street lenders — including HSBC, Barclays, Halifax, and Nationwide — have all moved to raise rates in response to rising swap rates, which are the financial benchmarks banks rely on when pricing fixed mortgage deals. HSBC confirmed it would implement a second round of increases effective Thursday, signalling that the repricing wave is far from over. The scale and pace of these adjustments reflect just how quickly investor sentiment has shifted since the outbreak of hostilities in the Middle East.
According to data from Moneyfacts, nearly 500 residential mortgage products were pulled from the market within a 48-hour window — the most significant wave of withdrawals since the chaos that followed the UK’s September 2022 mini-budget. The average two-year fixed-rate mortgage reached 5.01%, up from 4.84% just before the US-Israeli military action against Iran. The five-year fixed rate has similarly climbed to 5.09%, reversing months of gradual improvement for borrowers.
The timing is particularly difficult given that approximately 1.8 million fixed-rate mortgage deals are set to expire in 2026, leaving millions of households needing to secure new arrangements in a market that has suddenly become more expensive. Prior to the conflict, economists had widely expected the Bank of England to cut the base rate twice this year, building on the four reductions delivered in 2025. Those expectations have now been drastically revised, with the probability of any rate cut in 2026 falling from 50% to just 20% in a matter of days.
The central concern driving this shift is that higher oil and gas prices, a typical consequence of Middle East conflict, will reignite inflationary pressures in the UK economy. The Bank of England’s March 19 meeting is now widely expected to result in the base rate being held at 3.75%, with analysts cautioning that a rise cannot be entirely ruled out. As Adam French of Moneyfacts noted, how far rates ultimately travel will depend entirely on how the conflict develops and what it does to global inflation expectations.