Before the US-Israel war with Iran began, financial markets had been expecting a cut in UK interest rates at some point this year.
But these expectations vanished after rising oil prices raised the prospect of higher inflation.
The yield, or interest rate, on two-year government bonds – which indicates how much it would cost to borrow money for two years – has been volatile.
“Recent days have been some of the most turbulent in the UK mortgage market since the aftermath of the September 2022 mini-Budget,” said Adam French, head of consumer finance at Moneyfacts.
“It’s unwelcome news for borrowers, as the prospect of falling mortgage rates has quickly given way to rate rises,” he said, adding: “How far they could go is now heavily dependent on how global markets and inflation expectations evolve as conflict in the Middle East unfolds.”
Lenders are lifting mortgage rates as they respond to changing predictions about the future direction of the Bank of England’s benchmark rate, which dictates borrowing costs.
For borrowers, the interest rate on a fixed mortgage does not change until the deal expires, usually after two or five years, and a new one is chosen to replace it.
