The Swap Rate Spike
SONIA swap rates—the wholesale cost that determines fixed mortgage pricing—have jumped approximately 0.5% on the 2-year rate in recent days. This isn't about the Bank of England's base rate. It's about market expectations for future inflation driven by soaring energy prices.
When oil prices surge, inflation fears return. When inflation fears return, markets price out interest rate cuts. And when rate cuts get priced out, swap rates rise—forcing lenders to increase fixed mortgage rates even if the Bank of England hasn't moved yet.
The numbers tell the story: market expectations for a March 19th rate cut have collapsed from 80% probability to just 15% in a matter of days. Expectations for two rate cuts in 2026 have been completely wiped out. Markets now expect only one cut this year—if that.
What Lenders Are Doing
HSBC and Coventry Building Society have already announced increases taking effect from Thursday 6th and Monday 10th March respectively. Industry experts warn this is just the beginning.
"Once we enter this cycle of lenders adjusting their rates, we know that it almost invariably results in others following suit," Hollingworth explained. "The current uncertainty means that this upward pressure doesn't look likely to ease quickly."
The pattern is familiar to anyone who remembers previous market shocks: one major lender moves, others quickly follow to avoid being overwhelmed with applications at rates they can no longer profitably sustain.
The Bigger Picture
The conflict has disrupted more than 20% of global oil supply. Brent crude has risen 36% this year. The Strait of Hormuz—through which roughly one-fifth of global oil and LNG shipments normally pass—has seen tanker traffic drop by 80%.
Goldman Sachs has already raised its oil price forecast by $10 per barrel for Q2 2026, warning that a sustained five-week disruption could push prices to $100 per barrel. European natural gas prices spiked as high as €56/MWh before falling back to around €48/MWh on reports of potential negotiations.
The National Institute of Economic and Social Research has warned that if energy prices remain elevated, policymakers might need to reconsider planned rate cuts. In a worst-case scenario, the base rate could even rise above 4% again if inflationary pressures intensify.
What You Should Do Now
If you're buying or remortgaging in the next 3-6 months, act this week.
The best 2-year fixed rates currently available are around 3.55% at 60% LTV. Yorkshire Building Society still has deals at this level. But with major lenders pulling products and repricing upward, these rates could disappear within days.
Remember: even if your fixed deal doesn't expire for another 4-6 months, you can lock in a new rate now that will start when your current deal ends—avoiding early redemption charges while securing protection against further increases.
The irony is bitter: inflation had actually fallen. The UK was on track. The March rate cut looked virtually certain just a week ago. But mortgage rates are forward-looking, and right now, markets are pricing in renewed inflation risk from energy prices—regardless of what the actual data shows today.
How Long Will This Last?
That depends entirely on how quickly the Middle East situation resolves. Oxford Economics suggests the conflict is unlikely to last beyond two months. If they're right, and oil prices normalise relatively quickly, swap rates could settle back down and lenders could resume cutting rates later in the year.
But "relatively quickly" still means weeks or months of elevated rates. And in mortgage markets, weeks matter. The difference between locking in 3.55% today versus 4.05% in two weeks is £83 per month on a £200,000 mortgage—nearly £1,000 per year.
The Bottom Line
This isn't panic. It's reality. Geopolitical events have fundamentally changed the near-term outlook for UK mortgage rates. The improvements we saw in January and February are unwinding rapidly.
If you have a decision to make on a mortgage in the coming months, make it this week. The rates available on Friday 7th March may not be available on Monday 10th March. And Monday's rates may not survive until Friday.
The mortgage market had been expecting a booming 2026. Instead, it's got a reminder that global events still matter—and they matter fast.
Need help securing a mortgage before rates rise further? Call us on 0330 043 0327 or visit mortgagesnorthernireland.com to get expert advice and access to the best deals still available.
