Some lenders have already paused or reconsidered planned rate reductions, it has been revealed.
The move comes in response to the repercussions of the military conflict in Iran and the wider middle east, according to Moneyfacts.
It explained that so-called swap rates – which are used to help set mortgage rates – hit a 30-day high amid the escalating conflict.
Moneyfacts suggested that the sharp increase was “pouring cold water” on the prospect of cheaper borrowing costs in the short term as markets turn against the chances of a March base rate cut.
Two-year swaps had risen by 26 basis points from 3.33 per cent on Friday to 3.59 per cent on Wednesday morning, while five-year swaps had risen 21 basis points from 3.50 per cent to 3.71 per cent during the same period.
Rates rising sharply
Adam French (pictured), Head of Consumer Finance at Moneyfacts, said: “Swap rates have been rising sharply as conflict with Iran spreads across the Middle East, driving oil and gas prices higher and reigniting inflation concerns.
“The immediate consequence has been higher gilt yields and a rapid shift in interest rate expectations, with the prospect of a Bank of England base rate cut later this month now looking far less certain. For the mortgage market, the impact is almost instantaneous.
Some lenders have already paused or reconsidered planned rate reductions.”
“Some lenders have already paused or reconsidered planned rate reductions.”
“Because fixed mortgage pricing is closely linked to swap rates, this sudden market movement risks halting the recent momentum towards lower mortgage rates just as borrower confidence had begun to build ahead of an anticipated rate cut.
“It serves as a stark reminder that mortgage costs are not driven solely by domestic policy decisions. Global geopolitical events move markets, markets move swap rates, and swap rates ultimately shape the deals available to borrowers – all while the world watches deeply troubling events unfold.”
