For borrowers preparing to seek new mortgage deals, the first quarter of 2026 has laid bare just how rapidly market conditions can change, switching in this instance from encouraging to erratic.
It was only last month that various lenders were competing to offer attractive terms, with companies having priced in the potential for upcoming cuts to the Bank of England’s base rate.
But it is a drastically different story today, with hundreds of residential mortgage products withdrawn in March, in part as the Iran war impacts the UK economy and also due to rising swap rates as speculation over interest rate hikes grew.
Ryan Brailsford, director of sales at lender Pepper Money says: “Rising energy prices and geopolitical tensions have pushed up swap rates, which lenders use to price fixed-rate mortgages, and a number of high street lenders have already responded by increasing rates.” According to Moneyfacts, average mortgage rates have climbed above 5 per cent in March, marking the highest figure in seven months and currently hovering near 5.5 per cent approaching April.
With tensions in the Middle East contributing to what Craig Fish, the founder of broker Lodestone Mortgages calls the “most unpredictable forecasting environments in recent years”, there are various directions costs could go in, making forward planning hard for consumers.
So what do property and lending experts think the outlook could look like for mortgage rates for homeowners and first-time buyers in the second and third quarters of 2026? Is there any advice for households?
The Financial Conduct Authority estimates some one million fixed rate mortgage deals are due to expire between April 1 and the end of September.
This will likely see a significant amount of new agreements sought. In addition, those stepping on the property ladder for the first time will also be shopping for loans.
The Bank of England’s Bank Rate is currently 3.75 per cent, and, prior to the latest conflict in the Middle East, forecasters had pencilled in an interest rate cut for as soon as March. But that changed to a vote to hold as rising oil prices brings the threat of incoming higher inflation.
Jonathan Samuels, chief executive of specialist lender Octane Capital, says: “Mortgage rates can shift far more quickly than many borrowers realise because they are influenced not just by the Bank of England base rate, but by wider economic sentiment and global events.”
The table below from Octane Capital sums up an estimated comparison of base rate and subsequent mortgage rate scenarios if the Iran conflict persists through to summer and brings about an interest rate hike, or ends sooner allowing a rate cut to come later in the year.
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