Mortgage professionals weigh in on where borrowing costs are headed amid a brittle truce
The announcement of a ceasefire between the US and Iran stirred hopes of a more durable peace deal to calm oil prices and ease global economic jitters – but UK mortgage industry members aren’t convinced it’ll have an immediate positive impact on the national housing outlook.
News of a two-week cessation of hostilities arrived late on Tuesday night, sending gilts lower as financial markets adjusted their expectations for the Bank of England’s interest rate approach for the rest of the year.
Markets now see just one rate hike by the central bank in 2026, a stark difference from March forecasts of up to three rate increases by BoE decisionmakers.
But for the housing and mortgage sectors, it’s “too early to tell” whether the ceasefire will materially improve consumer confidence and homebuying appetite, according to Hudson Rose managing director Graham Taylor.
While the outlook on the BoE base rate now appears more stable, Taylor doesn’t see rates posting a sharp downward trend – although it could at least slow the trend of major high street lenders bumping up their own rates.
“I don’t expect a sudden turnaround to where we were prior to the war starting, but hopefully we might see a roll back on some of the rate hikes as lenders become more confident in their outlook,” Taylor told Mortgage Introducer.
Still, details are thin on the ground on what form the upcoming negotiations between the US and Iran on a more permanent end to the war might take, and US mortgage professionals have already flagged the fact that the two sides appear to be some distance apart on a deal.
For Taylor, that uncertainty is part of the reason for tempered expectations looking ahead. “The issue with the current leadership in the US is that it’s unpredictable,” he said. “So for now, I think it’s a case of hoping for the best but not being surprised if things turn out a little trickier.”
‘Meaningful shifts’ in mortgage pricing unlikely for now
Sam Fox of UK Mortgage Centre told MI that borrowers hoping for immediate rate relief because of the ceasefire would likely be disappointed.
“We’re not expecting any meaningful shifts in mortgage pricing, especially with fixed deals,” she said, “although some specialist lenders are still bouncing around interest rates as there’s so much uncertainty.
“From a client’s perspective, there’s still a sense of caution, rather than confidence. Borrowers are far more focused on their affordability, securing rates as early as possible, trying to time the market if rates drop, so they have enough time to alter their mortgage products ahead of any completions or remortgages.”
The fragile ceasefire appeared to hang in the balance on Wednesday evening as Israel ramped up attacks on Lebanon while Iran indicated it would halt oil traffic through the Strait of Hormuz again.
Brokers, lenders take a ‘wait-and-see’ approach to ceasefire impact
The days and weeks ahead will prove crucial in determining whether the war winds down – and whether the UK and other major economies can avert an inflation crisis from skyrocketing oil prices.
That will have huge implications for the housing market. “Any level of sustained improvement on mortgage rates will depend on the trajectory of inflation and the Bank of England base rate decisions,” Fox said, “which hopefully will ease should the ceasefire in the Middle East continue.”
Swap rates plunged in the immediate aftermath of the ceasefire, but that won’t necessarily translate into a sudden flurry of rate cuts by major lenders.
“It’s just whether or not the lenders have the faith in that being able to continue to allow them to decrease rates accordingly,” said Anthony Emmerson of Trinity Financial.
He noted that many of the real consequences of the weeks-long war on the UK economy still haven’t been revealed, likely giving the central bank and mortgage lenders reason to pause before rushing into decisions.
“We are yet to see the inflationary impact of the increase in the fuel costs via the inflation data, and because of that I think that the lenders would maintain their higher margins for now and not immediately pass on the decrease in the swap rates right away,” he said.
“If anything, I think the likelihood is that more lenders will maintain rates at the current level for a little while to see whether the ceasefire holds.”
While Rebecca Wilkins of Cutting Edge Mortgages said she had already seen some emails from lenders reducing rates, she "hesitated to rely on" whether that was a permanent trend. "It still feels very unsettled and anything could happen," she said.
Economists have emphasised that oil price and inflation trends aren't likely to change sharply immediately after the ceasefire. For IMS Property Group's Michelle Niziol, that's one of the main reasons mortgage pricing doesn't seem set to meaningfully shift for now.
"Lenders have moved quickly to reprice upwards in recent weeks but they tend to be far more cautious on the way back down and will want to see sustained stability before making any meaningful changes," she said.
"Lenders remain firmly in a wait-and-see position and that will only shift with a period of consistent stability and markets responding positively to it. for now, I'm not expecting any dramatic changes to mortgage rates. Buying decisions still need to be based on current affordability rather than trying to second-guess where rates might go next."
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