Iran Ceasefire: Will UK Mortgage Rates Fall?

What the Ceasefire Means for Markets

On 7 April 2026, Donald Trump announced a 14-day ceasefire between the US and Iran, reopening the Strait of Hormuz — the critical shipping route through which roughly 20% of the world's oil flows. Oil immediately fell below $100 a barrel, and global stock markets rallied.

For UK mortgage borrowers, the question is simple: will this translate into lower rates? The answer, unfortunately, is not straightforward. While the ceasefire removes some of the upward pressure on inflation expectations, six weeks of conflict have already pushed up costs throughout the economy.

Matty Stevens, founder of The Mortgage Genie, says: "The ceasefire is a huge relief for the mortgage market — but the damage is done in terms of pricing. Swap rates are still elevated, lenders have already repriced, and inflation hasn't actually fallen yet. What the ceasefire does is stop things getting worse, which is the first step towards rates coming down."

How Far Rates Have Already Risen

The numbers tell a stark story. Before the conflict began on 28 February, the lowest fixed-rate mortgage deals were around 3.5%. By early April, those same best-buy rates had risen to approximately 4.75% — an increase of 1.25 percentage points in barely six weeks.

According to Moneyfacts, the average two-year fixed rate reached 5.90%, its highest since July 2024. Five-year fixes hit 5.78%, the highest since November 2023. Sub-4% deals effectively disappeared from the market in mid-March.

For someone moving a £200,000 mortgage from the 1% rate they secured five years ago to today's 4.75%, monthly repayments jump from £753 to £1,140 on a 25-year term — an extra £387 a month, or £4,644 a year. Our affordability guide can help you work out what you can manage.

What Mortgage Advisers Are Saying

The consensus among mortgage professionals is cautious optimism — emphasis on cautious.

Industry experts suggest the ceasefire could lead to a 'welcome pause' in the daily rate increases suffered by borrowers over the past month. Home buyers may see rate cuts before those remortgaging, as lenders prioritise purchase business during the peak spring buying season.

However, others warn that the economic damage from the conflict is already embedded. Gilt rates may move down modestly, but not enough to prevent mortgage rate increases over the next six months.

Matty Stevens at The Mortgage Genie adds: "I've been telling clients for weeks — don't wait for rates to come down, because even in the best-case scenario it won't be overnight. Lock in what's available now and protect yourself. If something cheaper comes along, we'll switch you. That's the beauty of Fee Free Advice — it costs you nothing to keep your options open."

Base Rate Prediction: What Happens Next?

The Bank of England held the base rate at 3.75% in its most recent decision and has adopted a cautious approach. The key question is whether the ceasefire changes the calculus enough for the Monetary Policy Committee (MPC) to resume cutting.

Best-case scenario (ceasefire holds, oil falls to $70–80): The MPC could cut the base rate in June or August, reaching approximately 3.50% by year-end. This is Oxford Economics' baseline view.

Middle scenario (fragile ceasefire, oil at $85–95): The MPC holds through the summer and delivers a single cut in November. Bank Rate ends 2026 at 3.50%–3.75%.

Worst-case scenario (conflict resumes, oil above $100): Inflation pushes towards 3.5%, forcing the MPC to raise the base rate to 4.00% or higher. Rate cuts are off the table until at least mid-2027.

For borrowers on tracker mortgages, any base rate change will hit your payments directly. Those on fixed deals are protected until their term ends — another reason why locking in now makes sense.

Fixed Mortgage Rate Forecast: Rest of 2026

Fixed mortgage rates are primarily driven by swap rates — the cost at which lenders borrow money from each other. Swap rates are forward-looking and react to inflation expectations and anticipated Bank of England policy.

With the ceasefire in place, two-year swap rates have already retreated slightly from their March peak. If this trend continues:

• Best-buy two-year fixes could gradually ease from ~4.75% to 4.25%–4.40% by Q4 2026
• Best-buy five-year fixes could fall towards 4.10%–4.30%
• Average rates (across all products) would remain higher, likely between 5.00% and 5.50%

However, the sub-4% deals that were available in February 2026 are almost certainly gone for the rest of the year. Most forecasters don't expect sub-4% best buys to return before mid-2027 at the earliest.

Matty Stevens notes: "I'd love to tell clients that 3.5% two-year fixes are coming back, but realistically we're looking at 4.25% as the floor for the rest of 2026. That said, 4.25% is still historically reasonable — and it's miles better than sitting on a 7%+ SVR. The key is acting, not waiting."

What You Should Do Right Now

Whatever happens with the ceasefire, mortgage advisers are united on one point: don't sit and wait for rates to magically fall.

• Lock in a rate: You can secure a mortgage rate six to nine months in advance. If rates drop before completion, most lenders let you switch to the cheaper deal.
• Don't stay on your SVR: The average standard variable rate is over 7%. Even the current 4.75% best-buys save you thousands a year on a typical mortgage.
• Consider your term: If affordability is tight, extending your mortgage term can reduce monthly payments, though you'll pay more interest overall.
• Protect your income: Higher mortgage payments mean greater financial vulnerability. Ensure you have appropriate life insurance and income protection.
• Get Fee Free Advice: A whole-of-market adviser can compare 90+ lenders and find deals you won't see on comparison websites.

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