Mortgage rates have climbed to their highest point in four weeks after renewed military conflict in the Middle East sent oil prices surging past $100 a barrel for the first time since May.
The average two-year fixed rate now stands at 5.58%, according to Moneyfacts, while five-year deals have risen to 5.6%. Both figures remain below the peaks reached during the initial Iran conflict in April, when two-year fixes briefly touched 5.9%, but the direction of travel has unsettled borrowers who had grown cautiously optimistic through June.
Rachel Springall, finance expert at Moneyfacts, said: “It will be incredibly frustrating for borrowers to see rates rise back up to where they were a month ago. The positive progress over recent weeks now feels all but lost, but what the market needs is a period of stability.”
Fresh strikes and Houthi militia attacks on oil tankers in the Red Sea have reignited fears over global energy supplies. Brent crude climbed above $100 on Thursday after several days of sustained increases, stoking concern that higher fuel and energy costs will feed through into broader inflation.
For the mortgage market, the chain of cause and effect is straightforward. Higher oil prices raise inflation expectations. Higher inflation expectations reduce the likelihood of Bank of England rate cuts. And without rate cuts, lenders’ funding costs on the swap markets stay elevated, or climb further.
The result is already visible on high street shelves. Springall noted that 100 mortgage deals have been pulled temporarily as lenders reconsider their pricing. David Hollingworth of L&C Mortgages was blunt about the shift: “Any borrower hoping for rate cuts to become an ongoing trend will need to rethink. Momentum has performed an about turn.”
The timing is particularly frustrating because domestic inflation data released this week pointed in the right direction. The Consumer Prices Index fell to 2.6% in June, down from 2.8% the previous month and its lowest reading in 15 months. Transport costs and food prices drove the largest downward contributions.
On paper, that brings the Bank of England’s 2% target closer into view. In practice, the picture is more complicated.
Victoria Scholar, Head of Investment at interactive investor, warned the data could represent “the calm before the storm”. She pointed to July’s 13% increase in the Ofgem energy price cap alongside surging oil prices as likely to push inflation higher again in coming months.
Nathan Emerson, CEO of Propertymark, echoed the caution: “While it’s encouraging to see inflation move closer to the Bank of England’s 2%, household affordability remains under pressure. Renewed international political tensions could still impact the wider economy, particularly over the summer months.”
Bank of England projections suggest just over five million homeowners should expect their monthly mortgage repayments to increase by the end of 2028 as existing fixed deals expire and are replaced at higher rates. That figure won’t have surprised many, but the renewed upward pressure on pricing makes the transition more painful than it might have been.
More than eight in ten mortgage customers sit on fixed-rate deals. Their rate won’t change until the deal expires, typically after two or five years, at which point they face today’s higher pricing.
Springall’s advice for those approaching a renewal: lock in with your existing lender ahead of time, but also consult a broker. “Brokers are an anchor during turbulent times,” she said. “They can help borrowers keep abreast of changes and be there step by step when going through a mortgage application.”
For buyers across Norfolk and Suffolk, the rate environment adds another layer of calculation to purchasing decisions. Markets in towns like Norwich, King’s Lynn and Great Yarmouth have seen increased stock levels this summer, giving buyers greater choice but also more time to hesitate.
The danger for sellers is that hesitation becomes paralysis. Ben Thompson, Director of Home Moving Strategy at the Mortgage Advice Bureau, offered practical advice: “Whether you’re a first-time buyer or a remortgager coming off a cheaper fixed deal, it’s worth exploring options sooner rather than waiting later. Locking in a rate you’re comfortable with now is often a smarter move than waiting on the chance of a better one later.”
All eyes now turn to the Bank of England’s interest rate decision later this month. The base rate, currently at 4.5%, was widely expected to remain unchanged before the latest oil price spike. The inflation data alone might have offered a case for a cut. The geopolitical reality almost certainly rules one out.
For the property market, the consequence is a summer of careful decisions. Mortgage costs aren’t catastrophic by historical standards, but they’re stubbornly higher than the rates many buyers had been planning around. The borrowers who move decisively, armed with good advice and realistic expectations, will find that deals are still available. Those who wait for a return to sub-4% rates may be waiting a long time.
The Ivybridge Collection’s 324-location property market reports offer detailed, up-to-date analysis for buyers and sellers looking to understand how national trends are playing out in their local area.
