Oil Prices, Mortgages Rates And The Uk Property Market

Someone asked me today what impact the situation involving Iran might have on the UK property market. The main area to watch is interest rates.

 

Over the past six months, mortgage markets had been gradually improving. Swap rates, which largely determine the cost for lenders to offer fixed rate mortgages, had been trending downwards. That allowed lenders to slowly reduce mortgage rates and helped support buyer confidence across the housing market.

 

However, in the last seven days we have seen a slight change.

 

Following the escalation of conflict involving Iran, global oil prices have risen. Higher energy costs can feed into inflation because fuel, transport and production costs increase across the wider economy.

When inflation risks rise, financial markets often assume central banks may need to keep interest rates a little higher for longer in order to keep inflation under control. Those expectations quickly influence swap rates, which are the funding benchmark lenders use when pricing fixed rate mortgages. When swap rates move up, mortgage rates can follow.

 

Five year swap rates have risen by around 0.2% over the last seven days (from 3.9% a week ago to 4.1%) and are now back to levels last seen in March 2025. While that might sound significant, they are still a third lower than the levels seen in the summer of 2023  (Swap rates today 4.1% vs 5.3% in June 2023) .

 

As a result, some lenders have already nudged their five-year mortgage rates up by 0.1% to 0.2%. On a £200,000 mortgage, a 0.2% increase would equate to £33 per month.

The housing market itself continues to function well. 25,603 homes sold last week in the UK, 5.13% higher than the 2026 weekly average. Buyers are still buying and homes are still selling. The recent movement in swap rates does not fundamentally change the direction of the property market.

 

What it does highlight, however, is something that has always been true.

 

Pricing realism remains important.

Across the long term, the data shows that only 53.5% of homes that come onto the market go on to sell. The difference between those that sell and those that sit unsold is very often pricing.

Homes launched with realistic, evidence based asking prices attract viewings and offers. Homes that come to market with expectations that stretch beyond the current market conditions can take longer to find a buyer. So, while the housing market remains active, sensible pricing remains the key factor in ensuring a successful move.

 

Homes that are priced correctly continue to sell well, while those chasing yesterday’s market often take longer to find their buyer.