UK mortgage costs rise as Iran war begins to bite

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The conflict in Iran continues to rattle markets, sending the average rate of a two-year fixed mortgage above 5%. Nearly 500 products have been taken off the market in the past 48 hours, while five-year mortgage rates are also up. The Bank of England cut interest rates from 4.75% to 3.75% over the course of 2025, but now traders predict they will increase again to combat inflationary pressures from the energy logjam in the Gulf. The mortgage jump is not as bad as the one caused by Liz Truss’s mini-budget in 2022. But it is a worry for the 1.8m people due to remortgage this year. Many of these are coming off a 0.1% base rate.