The UK mortgage market has been thrown into disarray following the outbreak of conflict in the Middle East, with lenders withdrawing hundreds of deals and pushing rates above 5% within the space of 48 hours. Analysts have described the episode as the worst bout of market turbulence since the fallout from Britain’s ill-fated 2022 mini-budget, which itself sent shockwaves through the financial system. The war, involving US and Israeli military action against Iran, has reignited fears about inflation and reshaped expectations for interest rate policy across major economies.
Moneyfacts reported that close to 500 residential mortgage products were pulled from the market over two days as lenders scrambled to reprice their fixed-rate offerings. The average two-year fixed rate rose to 5.01% — up from 4.84% before the conflict broke out — while the five-year fixed rate climbed to 5.09%. Major lenders including HSBC, Halifax, Nationwide, and Barclays all implemented increases, with HSBC announcing a second wave of hikes to begin Thursday.
Adam French, head of consumer finance at Moneyfacts, acknowledged the severity of the situation while also providing some historical context. He noted that while nearly 500 products being removed is alarming, it does not match the single-day loss of 935 products that occurred during the 2022 mini-budget crisis — a period that represented an even more extreme rupture in the market. Nevertheless, French described the current environment as one of the most challenging UK mortgage borrowers have faced in recent years.
The implications for borrowers are significant. Around 1.8 million fixed-rate mortgage deals in the UK are due to expire during 2026, leaving those borrowers in the difficult position of seeking new arrangements at precisely the moment rates are rising. Prior to hostilities breaking out, those individuals could have expected to benefit from anticipated central bank rate cuts; that prospect has now all but vanished for the near term.
Financial markets have dramatically revised their expectations for Bank of England policy, with the probability of a rate cut at the March 19 meeting falling from 80% to essentially zero following the outbreak of conflict. The broader probability of any 2026 rate reduction has declined from 50% to 20%. French noted that further movement in mortgage rates — in either direction — will depend on how global markets and inflation evolve as the conflict continues.