As global tensions continue to drive volatility in oil markets, pushing fuel prices up even further this week, UK homeowners could soon feel the impact through higher mortgage costs.
Oil prices have surged in recent days amid escalating geopolitical uncertainty, raising concerns about renewed inflationary pressure.
While the connection may not be immediately obvious, property finance experts warn that these global events can quickly filter through to the UK housing market, and something we should be prepared for over the next few weeks.
Tom Rowlands, Property Finance Specialist at Pure Property Finance, says:
“There is often a clear chain reaction that starts with global conflict and ends with what mortgage rates people are on each month.
When oil prices rise, it increases the cost of energy and transport, and therefore has a knock on effect with inflation, pushing this back up.
In response to this, lenders and property markets are anticipating higher interest rates for longer, and that feeds directly into what people are paying towards their mortgage prices.”
Higher inflation expectations often lead to increases in swap and mortgage rates, the mechanism that lenders will use to price fixed-rate mortgages.
This will mean that even those that aren’t directly impacted by rising energy costs could see borrowing become more expensive over the next few weeks.
Recent data shows that average two-year fixed mortgage rates remain above 5%, significantly higher than the sub-2% rates seen prior to the pandemic.
Even small increases can have a major impact on monthly repayments. For example, a 0.5% rise on a £250,000 mortgage could add around £75–£100 per month, equating to over £1,000 a year.
Tom continues:
“You don’t actually need interest rates to rise for mortgage costs to increase. The markets will move first, and lenders will react almost instantly to cover their own fees.
Even if the UK has nothing to do with any of the conflicts, the UK will usually still get hit with increased costs along the way.
For homeowners coming to the end of fixed-rate deals in 2026, the timing could be particularly challenging.
Many are already facing a sharp jump in repayments compared to their previous rates, and further volatility could limit opportunities to secure more favourable deals.
For borrowers, it’s about being proactive. If your deal is ending in the next six months, it’s worth exploring options early and potentially locking in a rate to protect against further movement. Waiting in uncertain conditions can be a gamble.”
While global conflicts may feel distant for now, their financial impacts in the UK are not, and home owners need to consider whether they’re best locking in a fixed-rate now or riding it out and taking the gamble.
