Average UK mortgage rate rises to highest since August 2024; Next warns Iran war will push up costs – business live

UK mortgage rates have surged to an average of 5.50%, the highest since August 2024, driven primarily by inflationary pressures linked to the war in Iran. This rise means the typical annual cost of borrowing £250,000 over 25 years has increased by more than £1,075, significantly raising the cost burden for homebuyers and remortgagors. Analysts warn that if predicted further base rate hikes materialize, average mortgage rates could stabilize between 5.75% and 6.00%, potentially adding £1,500-£2,000 per year in mortgage costs compared to a few weeks ago. The recent unusual inversion between two-year and five-year fixed mortgage rates reflects market volatility, with two-year rates climbing to 5.56%, surpassing five-year rates now at 5.54%. Market commentators point to heightened uncertainty due to geopolitical tensions and their ripple effects on inflation and interest rates, causing lenders to rapidly reprice products amid rising funding costs. Brent crude oil prices have risen by 2.7% to $104.97 a barrel amid ongoing Middle East conflict concerns, which experts believe could sustain inflationary pressures and keep central banks cautious on rate cuts. This geopolitical risk represents a key near-term market catalyst, potentially prolonging elevated borrowing costs and influencing precious metals sentiment as investors weigh inflation and safe-haven dynamics.