The Bank of England voted in March to keep interest rates unchanged at 3.75%, while cautioning that the Middle East conflict could yet stoke inflation and push borrowing costs higher.
For mortgage markets, the five-year swap rate remains the key benchmark, underpinning the pricing of fixed-rate deals.
Since the onset of the conflict, this measure has climbed, reflecting heightened uncertainty. In March, it has averaged 4.4% so far, up from 3.8% a month earlier.
Even so, the rise is modest compared with previous shocks. The rate has yet to revisit the peaks seen after the Liz Truss mini-budget or during the inflation surge of mid-2023, when it briefly exceeded 5%.
Still, the direction of travel is unsettling. Markets had entered 2026 expecting a kinder interest rates environment. Instead, the recent uptick marks a sharp reversal from the optimism of only a few weeks ago. Source: Dataloft by PriceHubble. Investing.com Data as at 19/03/26.