Mortgage lenders across the UK have begun raising rates once again, as global uncertainty linked to the ongoing Middle East conflict starts to ripple through financial markets. While many borrowers were hoping that 2026 would bring steady reductions in mortgage costs, recent developments suggest that interest rates may remain higher for longer than previously expected.
Several major lenders have already acted. Nationwide Building Society has increased some mortgage rates by as much as 0.25%, while HSBC UK and Coventry Building Society have also announced rate rises on selected products. These changes follow shifts in financial market expectations around how quickly the Bank of England may be able to cut interest rates in the coming months.
At present, the average two-year fixed mortgage rate stands at around 4.84%, with five-year fixed deals averaging 4.96%, according to Moneyfacts. Although these figures remain well below the peaks seen during the inflation crisis of 2023, they are still significantly higher than the ultra-low mortgage rates many borrowers secured just a few years ago.
A key concern is the impact of global energy prices. If oil and gas costs continue to rise due to geopolitical tensions, inflation could remain stubbornly high. This would make it harder for the Bank of England to cut base rates as quickly as markets had anticipated earlier this year.
The timing is particularly sensitive for homeowners and landlords. Nearly one million UK households are expected to come off five-year fixed mortgage deals in 2026, many of which were secured in 2021 when rates were below 2%. For these borrowers, refinancing could lead to a significant increase in monthly repayments.
Analysts estimate that households remortgaging this year could see annual mortgage costs rise by more than £2,000, while those reverting to standard variable rates could face increases of over £5,600 per year.
For landlords, higher borrowing costs may continue to influence investment decisions and rental pricing. While strong tenant demand remains supportive for the rental market in many areas, including cities like York, rising mortgage costs reinforce the importance of careful financial planning and reviewing mortgage options well ahead of renewal dates.
The wider lesson is that property finance is increasingly being shaped not just by domestic policy, but by global events. As the situation in the Middle East develops, lenders and borrowers alike will be watching closely to see how inflation, energy prices, and interest rate expectations evolve over the coming months.
