A wave of mortgage lenders have trimmed the cost of new fixed rate deals over the past month but fresh tensions in the Middle East throw further cuts into doubt
Mortgage rates have fallen at the fastest pace since October 2024 – but could be pushed back up by renewed tensions in the Middle East, experts have warned.
Industry experts Moneyfacts says average two and five year fixed rate mortgages have fallen by 0.16% and 0.11% respectively in the past month, with both at 5.52%
The drop came after the initial ceasefire between the US and Iran led to hopes of easing inflation and the reduced risk of central banks having to hike borrowing costs.
The Bank of England kept its base rate at 3.75% when its monetary policy committee last met to vote. However, there are fresh concerns about the fall-out from the resumption of air strikes between Iran and the US.
Moneyfacts’ data had pointed to other positive trends in the mortgage market over the past month. For example, the average five-year fixed rate at 95% loan-to-value had dipped below 6% for the first time since March, with first time buyers among those likely to benefit the most.
It added that mortgage availability increased for a third consecutive month, with product choice rising by 45 deals to 7,177 options. The market continued its recovery from the severe withdrawals caused by unsettled markets due to the conflict in the Middle East. However, it said there are still 307 fewer deals compared to the start of March.
Rachel Springall, finance expert at Moneyfacts, said: “Borrowers will breathe a sigh of relief to see fixed mortgages falling at their fastest pace for almost two years, combined with a calmer period of product churn and an uplift in choice.
“Lenders responded positively to falling swap rates in June, seeing notable drops to the average two and five-year fixed rates by 0.16% and 0.11% respectively, both settling at 5.52%. The last cuts of a similar scale came in October 2024, when the rates dropped by 0.16% and 0.13% respectively.
“It has been three months since fixed rates inverted, where the two-year fixed has been higher than its five-year counterpart. However, this has started to unwind, so the rates should hopefully start to fall back into a more traditional pricing structure.
“However, this positive trajectory could be thrown off course, as renewed escalation in geopolitical tensions could slow the tempo of mortgage rate cuts.” Brokers welcomed the findings but said lenders will be closely watching the situation in the Middle East.
Shaun Sturgess, director at Swansea-based Sturgess Mortgage Solutions, said: “Mortgage rates have been falling but sadly tensions in the Middle East are rising, with the US targeting military installations in Iran overnight and Iran claiming to have struck bases with US links in the region.
“Markets and lenders alike will be watching events in the Middle East closely and there is every prospect rates could rise again this week if we see further escalation.
“As ever, the message to borrowers is to not assume rates will continue to fall, as conditions remain volatile. Too many borrowers attempt to time the market and, at present, that is a high risk strategy.”
Emma Jones, managing director at Runcorn-based Whenthebanksaysno.co.uk, added: “In recent weeks, mortgage rates have been falling but the conflict in the Middle East is once again heightening and borrowers should have this firmly on their radars.
“2026 has been a textbook example of how quickly mortgage rates can react to geopolitical events and a continued fall in rates should not be taken for granted.”
Omer Mehmet, managing director at Welling-based Trinity Finance, added: “The latest Moneyfacts data contains many positives but the concern is the backdrop of events in the Middle East, which has the potential to end the current run of falling rates and once again see lenders enter defensive mode.
“The cuts we’ve seen of late may not continue if tensions escalate, despite the fact that lenders are keen to make up for a quiet first half of the year.”
