The Impact of the US-Iran War on UK Mortgage Rates

The last week has seen a substantial shift in the geopolitical spectrum, with the conflict in the Middle East affecting economies all over the world, including the UK.

For those who are looking to secure a mortgage in the coming months, it could be beneficial to move sooner rather than later. However, this is completely dependent on your specific situation and goals.

Why Is the US-Iran War Causing UK Mortgage Rates to Rise?

Several main lenders have already begun to put their rates up as the knock-on effect of the conflict makes an impact. One of the most significant factors involved is the rise in costs for energy supply from the region.

Approximately 20% of the global supply of crude oil flows through the Strait of Hormuz, between Oman and Iran. This route that has become extremely disrupted due to the conflict.

The globalisation of energy prices means that even though the UK is not reliant on this oil directly, countries that rely on this supply are now turning to alternative sources, raising the demand and price.

Other circumstances, including the shutdown of LPG production by QatarEnergy following Iranian attacks, further impact the complex global energy supply chain.

The cost of energy in the UK is rising accordingly, fuelling inflation which, in turn, will affect the Bank of England Base Rate. While this direct change to the base rate will take time (the next review is due on 19th March) the swap rates which banks use to lend money to each other are already seeing significant uplift.

Ultimately, these increased costs are passed onto the consumer and are also reflected in higher mortgage rates.

How Quickly Will Mortgage Rates Rise Due to the US-Iran War?

Lenders are reacting quickly to these changes, with some of the major banks implementing changes immediately and others likely to follow in the coming days:

• Nationwide is adjusting its rates for fixed rate products, taking effect immediately
• HSBC has increased its rates for new customers by between 0.10% and 0.25%, while existing customers are seeing a smaller change between 0.04% and 0.13%
• Coventry Building Society plans to increase rates from Monday 9th March

This is a reversal of the previous trend, which saw the Bank of England lowering rates recently with the anticipation that more cuts were expected.

Securing a Competitive Rate During the US-Iran Conflict

It is unclear how long the conflict in the Middle East will continue. Customers who were considering a new mortgage or remortgage in the near future may benefit from moving their plans forward, but depends entirely on your specific situation.

Those with existing fixed rate terms that are coming to an end may gain an advantage by locking in a replacement deal sooner rather than later, potentially saving thousands of pounds in the coming years.

If the conflict continues into the summer, rates may only rise higher causing those who choose to delay decisions into waiting even longer.

Most lenders allow you to make a switch during the last 3-6 months of your existing fixed term without incurring early repayment charges (ERCs). If your mortgage is coming to a close between now and August 2026, it may be possible to secure a product transfer or remortgage that ensures a smooth transition to a new mortgage before the effects of this conflict become more costly.

A proper evaluation is essential, balancing the advantages and disadvantages of ending your current term and replacing it with a new rate.

At Clifton Private Finance, our expert mortgage advisers can help you calculate the benefits of the options available to you, enabling you to make an informed decision.

Will Rates Drop Again When the US-Iran War Is Over?

The Bank of England adjusts the base rate in accordance with the national economy, working to keep inflation low, with a target of 2%. Analysts suggest that if the Iran conflict extends over many weeks, the impact on UK interest rates may be significant, upsetting much of the gains we have seen over the past year.

Conversely, a swift conclusion to the instability could be weathered, with rates remaining stable. However, it is unlikely that the previously expected cuts to the base rate in the first half of this year will take place.

Remortgaging with Clifton Private Finance

As a whole-of-market mortgage broker, Clifton Private Finance has access to the full network of UK mortgage providers, from the major banks to specialist lenders.

Our team works on your behalf to help you secure the most suitable mortgage, exploring the best rates and comparing product terms to ensure your mortgage suits your specific circumstances.

We offer:

• Expert advice and understanding of the changing UK mortgage landscape
• Access to the complete range of UK mortgage lenders
• Bridging and auction finance for time-sensitive deals
• Pre-approval process to improve application success
• Ongoing support throughout the process

To explore the most competitive rates that minimise the impact of the Middle East conflict, speak to a Clifton Private Finance adviser today.