UK Mortgage Rates Surge by 75 Basis Points Amid Rate Hike Uncertainty

UK mortgage rates have surged by around 75 basis points since hostilities between the US and Iran began in late February, according to Bank of England governor Andrew Bailey.

The Bank Rate has been held at 3.75% since last December, but this stability has done little to calm markets. A £4.25 billion sale of 30-year government bonds was struck at a yield of 5.8168%, the highest borrowing cost for gilts of that duration since the UK Debt Management Office (DMO) was established in 1998.

Nicholas Mendes, mortgage technical manager and head of marketing at John Charcol, told Mortgage Introducer markets are pricing in a 0.25% rate rise at some point this year, with some analysts expecting a further increase in 2027.

However, he believes it's too close to call whether the Bank will hike rates next week, citing two intersecting pressures: inflation and the October budget.