Three major mortgage lenders have increased borrowing costs amid growing concerns that renewed conflict in the Middle East could fuel inflation and delay further interest rate cuts.
Nationwide, Barclays and Virgin Money have all introduced mortgage rate increases today, reflecting heightened market uncertainty following the escalation of hostilities in the region.
Nationwide has increased selected fixed and tracker rates by up to 0.35%, while Virgin Money has raised selected two and five-year fixed rates by up to 0.35% and ten-year products by up to 0.2%. Coventry has also repriced its residential and buy-to-let fixed-rate range. The moves follow a series of mortgage rate reductions earlier this month as lenders respond to changing market conditions.
Investors fear disruption to oil and gas supplies through the Strait of Hormuz could push up energy prices, adding to inflationary pressures and increasing the likelihood that interest rates remain higher for longer.
The increased uncertainty has already pushed up government bond yields and swap rates, which lenders use to price fixed-rate mortgages.
Nicholas Mendes, mortgage technical manager at Charcol, said: “The driver is funding costs. Swaps briefly dipped below 4% across the one-to-five-year range at the start of July, which fuelled the round of cuts borrowers enjoyed just a week ago, but events in the Middle East have pushed them back up, with two-year swaps now at 4.179% and five-year at 4.260%.
“Lenders price off swaps, so some repricing was to be expected, and it’s worth keeping perspective. Rates remain well below where they were during the spike earlier this year, and the market has shown throughout 2026 that when conditions settle, lenders are quick to pass falling costs back to borrowers.”
Jack Tutton, director at SJ Mortgages, added: “The amount of some of the increases that lenders are making are significant. It strikes me that they feel that rates could be increasing for a while to come.
“Despite mortgage rates reducing on a consistent basis since the peace deal was struck a month ago, this has all been undone in a matter of days and it will not be long until the rest of the market starts to follow.”
The good news for borrowers is that competition between lenders remains strong, and analysts do not expect mortgage rates to rise sharply.
A Barclays spokesperson said: “We regularly review our mortgage rates for customers and have recently made a number of updates to our range. While many remain unchanged, some rates have increased and others have decreased.”
