MORTGAGE rates, which have been slowly coming down for much of 2026, could be set to rise, experts have warned, due to movements on the wholesale money markets following events in the Middle East. One broker urged borrowers to “grab a seat before the music stops”.
Swap rates, which fixed rate mortgages are priced off, edged up early on Monday, with the 2-year and 5-year swap rising by 3.6 basis points and 2.8 basis points respectively.
In recent weeks, a wide range of lenders have cut rates, with first-time buyers on the receiving end of some of the chunkier cuts.
But anyone in the process of taking out a mortgage needs to act fast, brokers have warned, as rising oil prices could prove inflationary and see the Bank of England quickly become more hawkish.
The rise in swap rates comes as new data published by the Bank of England shows an underwhelming start to 2026, with net mortgage approvals for house purchases falling to 60,000 in January, below an average of around 64,100 over the previous six months.
Approvals for remortgaging, the Bank of England found, decreased slightly to 38,100 in January from 38,400 in December.
Just like that
Omer Mehmet, Managing Director at Welling-based Trinity Finance, said: “And just like that the mortgage market can turn. Just when it felt a spring Bank of England rate cut was guaranteed, the events of the weekend are starting to have an adverse effect on swap rates and potentially mortgage pricing.
“Once again, this highlights that people simply cannot rely on mortgage rates predictably travelling in one direction. Anyone considering a mortgage at present should lock into a rate as soon as possible as the cuts of recent weeks could soon be reversed.”
Riz Malik, Director at Southend-on-Sea-based R3 Wealth, agreed: “Traders have curbed their rate cut predictions for this year, and even the possibility of a rate cut this month has taken a hit.
“We are in for market volatility and that volatility will get worse the longer this conflict lasts. Last week it seemed like the inflation target was in sight along with rate cuts. A lot can happen in one weekend.”
Not too dramatic
Louis Mason, Communications Director at London-based Oportfolio Mortgages, a broker, said “markets don’t like uncertainty and rising oil prices plus geopolitical tension tend to put inflation worries back on the table pretty quickly”.
He continued: “If this sticks, we could see some of the early 2026 rate cuts stall or even nudge backwards in March, although lender competition should stop things getting too dramatic.
“For borrowers, the honest advice is don’t try to outguess the market. Even professionals rarely get that right. If you’re buying or remortgaging, securing a deal now can be a bit like grabbing a seat before the music stops, especially as many lenders let you switch later if rates improve.”
Katy Eatenton, Mortgage & Protection Specialist at St Albans-based Lifetime Wealth Management, also worries Threadneedle Street could soon be in rethink mode.
She said: “The Bank of England is likely feeling a little less dovish on the back of the weekend’s events in the Middle East. The confident prediction that inflation would be back at target by the late spring is suddenly looking far less certain.
“Within as little as 48 hours, the inflation outlook has potentially changed.”
Huge setback
Samuel Mather-Holgate, Managing Director & IFA at Swindon-based Mather and Murray Financial, also believes mortgage rates could rise.
He said: “The downward trajectory of swaps is no more as markets price in inflation risk and the prospect that the Bank of England may not cut rates this month after all. Just a week ago, a rate cut felt guaranteed with Threadneedle Street making all the right noises to that end.
“Now, on the back of events unfolding in the Middle East, there’s every chance mortgage rates will rise again, which will be a huge setback for the property market just as it was starting to pick up momentum.”
Craig Fish, Director at London-based Lodestone Mortgages, warned borrowers not to try to outguess the market: “Rising swap rates on Monday morning are a reminder of how quickly sentiment can shift when inflation risks return. Higher oil prices and geopolitical uncertainty are pushing markets to reassess rate cut expectations, and we’re already seeing mortgage pricing react.
“After recent comments suggesting inflation was moving steadily in the right direction, Andrew Bailey may find those words tested sooner than expected if inflation pressures rebuild. Markets move faster than central bank guidance, and lenders price mortgages based on future expectations, not past statements.
“For borrowers, the lesson is clear: don’t try to outguess the market. Secure a mortgage that works for your circumstances and budget today, because waiting for the ‘perfect’ rate is often the biggest risk of all.”
Not nailed on
Rohit Kohli, Director at Romsey-based The Mortgage Stop said that while base rate rises are unlikely, short of an extreme deterioration in events and serious spike in inflation, this is the sort of backdrop that gives policymakers good reason to sit tight for longer.
He continued: “It also underlines why forward guidance is risky. Andrew Bailey looked a bit too confident saying 2% inflation by May was “nailed on”. For anyone taking out a mortgage now or remortgaging soon, don’t bank on rates steadily falling.
“If you’re within 3–6 months, review options early, secure a rate and keep the ability to switch if pricing improves before completion.”
But Aaron Strutt, Product and Communications Director at London-based Trinity Financial, believes a rate cut in the spring could still be on the cards.
He said: “The money markets want certainty, and there is suddenly a lot less with a major conflict in the Middle East and the ongoing war in Ukraine.
“If you have been holding off taking a new mortgage rate because you thought rates were only going to come down, it may well be worth securing a new rate and swapping to a cheaper one if and when it becomes available.
“However, I still suspect the Bank of England base rate will come down to ease the pressure on homeowners and to get people spending more money to boost the economy.”
Photo by Andy Hermawan on Unsplash
