What a difference a month can make for mortgage borrowers.
Just a few weeks ago, markets were optimistic. A narrow 5–4 vote by the Bank of England’s Monetary Policy Committee to hold the base rate at 3.75% suggested cuts could arrive later in 2026. Economists were predicting between one and three reductions, potentially bringing the base rate down to 3–3.5%. At the time, borrowers could secure attractive fixed mortgage deals well below 4%.
However, global events have quickly changed the outlook. The outbreak of conflict in the Middle East has unsettled financial markets and pushed expectations for inflation higher, particularly due to potential energy price rises.
Mortgage lenders have reacted rapidly. Over the past few days, hundreds of mortgage products have been withdrawn, with average fixed rates climbing sharply. The typical two-year fixed rate has now risen to around 5.01%, while the five-year average sits at 5.09%, the highest levels seen since mid-2025.
Only a handful of sub-4% deals remain on the market, and many analysts believe these will soon disappear.
If market volatility continues, tracker mortgages linked to the Bank of England base rate may soon become cheaper than fixed deals. For borrowers and landlords alike, it’s a reminder of how quickly global events can influence the cost of borrowing.
