Mortgages: Britons struggling to obtain loans since Iran war

Since the conflict with Iran escalated on February 28, 2026, higher global energy prices and rising funding costs have sparked acute disruption in the UK mortgage market. Lenders withdrew many products and repriced remaining deals, leaving buyers and those due to remortgage with fewer, more expensive options.

Market data and broker reports indicate a rapid rise in swap rates and gilt yields in March. Moneyfacts showed the average two‑year fixed mortgage moved from 4.83% to 5.51% by March 24, while a net cull of roughly 1,700–1,800 residential mortgage products reduced consumer choice. The Bank of England’s Financial Policy Committee described the conflict as a “substantial negative supply shock”, warning that market expectations had shifted toward a tighter interest rate outlook.

The immediate effect has been tangible for consumers: fewer low‑cost deals are available and typical fixed‑rate offerings have widened, pushing monthly repayments higher for many households. The squeeze is most acute for first‑time buyers and for the wave of borrowers whose fixed terms expire in 2026; lenders tightening underwriting standards is prompting demands for larger deposits and stronger income evidence.

Broader economic linkages are clear. Rising oil and gas prices feed into headline inflation, which in turn keeps pressure on bond markets and gilt yields—key drivers of retail mortgage pricing. That dynamic has rapidly reduced the likelihood of the rate cuts markets had hoped for at the start of 2026 and has left investors considering the possibility of at least one Bank of England rate rise this year. Several large UK housebuilders have warned that the current conditions make it harder for new buyers to enter the market, likening the strain to past stress episodes in the sector.

Looking ahead, analysts expect continued volatility in swap and gilt markets while geopolitical uncertainty persists. If the conflict remains unresolved, funding costs could stay elevated for longer and mortgage availability may remain constrained, prolonging pain for prospective buyers and refinancing households. Financial advisers and brokers recommend early engagement with lenders, improving deposit positions where possible, and scrutinising product terms to mitigate the impact of higher borrowing costs.