UK Mortgage Rates Rise Amid Middle East Conflict Fears

Nationwide, Barclays, and Virgin Money have increased their mortgage rates, signaling a shift in the market as renewed conflict in the Middle East fuels fears of rising inflation and interest rates. The geopolitical instability in the region has led to concerns about potential disruptions to oil and gas supplies, which could drive up energy costs and other household expenses.

These shifts have already impacted government bond yields and swap rates, key factors banks use to determine fixed mortgage pricing. While mortgage rates had been steadily decreasing for several months as the Middle East situation appeared to stabilize, this trend has now reversed.

Barclays was the first to announce an increase, raising rates by up to 0.37 percentage points. Nationwide and Virgin Money followed suit with increases of up to 0.35 percentage points. Mortgage brokers noted that global events can influence swap rates rapidly, prompting lenders to adjust their pricing within days.

Jack Tutton, director at SJ Mortgages, suggested that the magnitude of these increases indicates lenders anticipate rates may continue to rise. "The amount of some of the increases that lenders are making are significant," Tutton said. "It strikes me that they feel that rates could be increasing for a while to come."

The most significant rate hike from Barclays affects its 'Reward' five-year fixed mortgage for existing customers, with the rate increasing from 4.90 percent to 5.27 percent for those with 15 percent equity. Other Barclays products, including five-year and two-year fixed rates for those with smaller deposits, have also seen increases.

These adjustments come after a period of decline in mortgage rates. In June, average two-year and five-year fixed rates fell by 0.16 and 0.11 percentage points respectively, reaching their lowest point since the initial conflict in March. However, current data shows both average two-year and five-year fixed rates have increased in the past 24 hours, standing at 5.47 percent and 5.49 percent, respectively. The cheapest available deals are currently around 4.25 percent.

Sonia swap rates, which banks use to price fixed mortgages, have also risen, with five-year swaps reaching 4.3 percent from 4.05 percent a month ago. In parallel, the price of Brent Crude oil has climbed to $85 a barrel, up from a recent low of $71, though still below its early May high of $114.

Financial advisors recommend that borrowers needing a new mortgage soon should act quickly to secure current rates. "The good news is that competition between banks is still intense, and we're not expecting mortgage rates to spiral," said Doug Miller, director at Lansdown Financial Services. "Borrowers who act early will have the best chance of securing today's deals before any further increases."