UK mortgage rates have risen sharply despite no change to the Bank of England base rate, as swap markets react to geopolitical risk and energy price pressure. This article explains why fixed-rate products repriced so quickly and what it means for borrowers approaching refinancing decisions.

The average two-year fixed mortgage rate hit 5.5% on Wednesday. It was 4.83% on 2 March. That's a 67 basis point move in under 25 days, and it happened without a single Bank of England rate decision to trigger it.

That's the part I think a lot of people are missing. The MPC held at 3.75% on 19 March. Rates are unchanged. And yet the mortgage market repriced sharply and rapidly, because swap rates, not the base rate, are what lenders actually use to price fixed-rate products. Two-year SONIA swaps are now at 4.483%. That's the number that matters.

The driver is the Iran conflict. US and Israeli strikes began on 28 February, targeting energy infrastructure. Oil and gas prices moved. Energy inflation expectations moved. Swap rates followed. And then, fairly swiftly, every major lender's product range moved too. NatWest, Metro Bank, Aldermore, and Coventry all repriced or withdrew products this week. The cheapest two-year fixes at the start of the month were at 3.55%. By Wednesday, they had moved to 4.14%.

What has crystallised this week is the degree to which markets have flipped their view on where rates go from here. In January, the consensus was in favour of cuts. By Monday this week, markets were pricing in four base rate hikes before year's end, potentially taking us from 3.75% to somewhere near 4.75%. I don't know if that's where we end up. But I know that when markets price in four hikes, lenders don't wait to find out, they price it in now.

The low-deposit end of the market tells its own story. More than 200 products at 95% LTV have been pulled since the start of the month. The average 95% LTV two-year fix is now at 6.1%. On a £250,000 mortgage over 25 years, the repricing since 2 March costs a buyer approximately £1,200 more per year. That's not a rounding error for first-time buyers already stretched on affordability.

The February CPI data came out on Wednesday, 3.0% headline, core edging up to 3.2%. I wouldn't anchor too heavily on that figure. The ONS noted this is the last inflation print before the Iran conflict's energy impact registers. The Bank of England has already said it expects CPI to run between 3% and 3.5% in the second and third quarters. Some economists are putting the summer peak above 4%. The direction matters more than the current number.

Separately, Dubai's January numbers deserve a mention. AED 72.4 billion in property sales, a historic monthly record, up 63% year-on-year. Close to 990 homes sold for AED 10 million or more in a single month. In March, an Aman Residences transaction was completed at AED 422 million, four days into the escalation. My firm sees this kind of capital movement regularly: UHNW buyers with long-time horizons and genuine flexibility about where they hold assets don't necessarily retreat when geopolitical noise increases. In some cases, they accelerate.

For UK borrowers coming off fixed rates in the next few months, the key question is whether the product range available today, narrower and more expensive than a month ago, is still preferable to variable exposure in an environment where the forward curve is pointing upward. In most cases I'm looking at, the answer is yes. But the arithmetic is different for every borrower, and the private bank and specialist lender markets haven't repriced as quickly as the high street. There are still gaps worth exploiting.

The next MPC meeting is on 30 April. By then, we'll have one more month of CPI data reflecting some of the energy shock. That will tell us something about the trajectory, though probably not as much as where swap rates are sitting that morning.