Mortgage rates have fallen at the fastest pace since October 2024, but renewed tensions in the Middle East could push them back up, experts have warned.
Industry experts Moneyfacts reported that average two and five-year fixed rate mortgages have fallen by 0.16% and 0.11% respectively in the past month, both settling at 5.52%. The drop followed the initial ceasefire between the US and Iran, which led to hopes of easing inflation and reduced risk of central banks hiking borrowing costs.
Bank of England Rate and Middle East Conflict
The Bank of England kept its base rate at 3.75% when its monetary policy committee last met. However, fresh concerns have emerged from the resumption of air strikes between Iran and the US.
Moneyfacts’ data also pointed to other positive trends in the mortgage market over the past month. The average five-year fixed rate at 95% loan-to-value dipped below 6% for the first time since March, benefiting first-time buyers. Mortgage availability increased for a third consecutive month, with product choice rising by 45 deals to 7,177 options. However, there are still 307 fewer deals compared to the start of March.
Expert Warnings on Geopolitical Impact
Rachel Springall, finance expert at Moneyfacts, said: “Borrowers will breathe a sigh of relief to see fixed mortgages falling at their fastest pace for almost two years, combined with a calmer period of product churn and an uplift in choice. Lenders responded positively to falling swap rates in June, seeing notable drops to the average two and five-year fixed rates by 0.16% and 0.11% respectively, both settling at 5.52%. The last cuts of a similar scale came in October 2024, when the rates dropped by 0.16% and 0.13% respectively. It has been three months since fixed rates inverted, where the two-year fixed has been higher than its five-year counterpart. However, this has started to unwind, so the rates should hopefully start to fall back into a more traditional pricing structure. However, this positive trajectory could be thrown off course, as renewed escalation in geopolitical tensions could slow the tempo of mortgage rate cuts.”
Brokers welcomed the findings but said lenders will be closely watching the situation in the Middle East. Shaun Sturgess, director at Swansea-based Sturgess Mortgage Solutions, said: “Mortgage rates have been falling but sadly tensions in the Middle East are rising, with the US targeting military installations in Iran overnight and Iran claiming to have struck bases with US links in the region. Markets and lenders alike will be watching events in the Middle East closely and there is every prospect rates could rise again this week if we see further escalation. As ever, the message to borrowers is to not assume rates will continue to fall, as conditions remain volatile. Too many borrowers attempt to time the market and, at present, that is a high risk strategy.”
Emma Jones, managing director at Runcorn-based Whenthebanksaysno.co.uk, added: “In recent weeks, mortgage rates have been falling but the conflict in the Middle East is once again heightening and borrowers should have this firmly on their radars. 2026 has been a textbook example of how quickly mortgage rates can react to geopolitical events and a continued fall in rates should not be taken for granted.”
Omer Mehmet, managing director at Welling-based Trinity Finance, added: “The latest Moneyfacts data contains many positives but the concern is the backdrop of events in the Middle East, which has the potential to end the current run of falling rates and once again see lenders enter defensive mode. The cuts we’ve seen of late may not continue if tensions escalate, despite the fact that lenders are keen to make up for a quiet first half of the year.”
