Rates edging lower. The Bank of England’s “effective” interest rate on new mortgages slipped to 4.09% in January, from 4.15% in December, even as approvals fell to 59,999 – the lowest in two years.
Combined with falling long‑term rates into early 2026, this gave brokers the beginnings of a more “normal” spring: sharper pricing, more product choice and clients finally moving out of “wait and see” mode.
How the Iran conflict hits UK mortgage rates
The new Middle East flare‑up now threatens that improvement via oil and bond yields.
From the UK side, Brent crude jumped as much as 13% on the strikes, to around $82 a barrel, on fears of supply disruption. Higher energy costs make it harder for the Bank of England to bring inflation back to 2%, even though headline CPI had been expected to hit that level by April. Markets cut the odds of a March BoE base‑rate reduction from about 80% to 50% after the oil spike.
Globally, the dynamic looks very similar. Just as investors had pushed the US 10‑year Treasury yield down to an 11‑month low near 3.92%, weekend strikes on Iran sent it back up to roughly 4.03%, with the 30‑year also moving higher. Instead of the classic “flight to safety” into government bonds, the mix of higher oil, sticky inflation and measured rhetoric from Washington and Tehran produced higher – not lower – long‑term yields.