If it feels like mortgage rates can't make up their mind at the moment, cuts one week, hikes the next, you're not imagining it. This week we're digging into why that's happening, plus a primer for anyone weighing up becoming a landlord.
Why mortgage rates keep swinging: swap rates, and the conflict behind them Confirmed
Through June and into early July, fixed rates fell sharply, Moneyfacts' UK Mortgage Trends Treasury Report, published 13 July, showed the average two-year and five-year fixed rate both down to a joint 5.52%, the biggest monthly fall since October 2024. But that's already reversing: daily Moneyfacts figures reported by the Press Association show the average two-year fixed rate rose from 5.46% on Monday to 5.48% by Thursday, and the average five-year from 5.48% to 5.50%, small moves, but several major lenders have now announced fresh hikes, with brokers expecting more to follow.
The reason lenders can swing this quickly is that fixed-rate mortgages aren't priced directly off the Bank of England's base rate, they're priced off swap rates, the rate at which lenders themselves borrow to fund fixed-term lending, which moves with what financial markets expect the Bank to do with interest rates over the next two, five or ten years. Swap rates can move within days rather than months, and when they do, lenders often reprice fixed deals to match, sometimes withdrawing a product altogether and relaunching it a few days later at a different rate.
Right now, the single biggest driver of that volatility is the conflict between the US and Iran. A ceasefire agreed in June had calmed markets and helped fuel the June rate cuts, but it broke down in early July, and the two countries have exchanged strikes for several nights running, disrupting shipping through the Strait of Hormuz. Oil prices have jumped as a result, Brent crude rose more than 9% in a single session on 13 July, its biggest one-day jump since May 2020, and UK government borrowing costs have followed: the 10-year gilt yield topped 5% this week, and the 2-year gilt yield, which tracks interest rate expectations most closely, rose to its highest level since mid-May.
The worry for borrowers is what that does to inflation. The UK imports most of its energy, so a sustained rise in oil and gas prices tends to feed through to the cost of living, when the conflict first flared in February and March, the Bank of England said it expected inflation to climb towards 3 to 3.5% over the summer as a result. The most recent actual figure, for May, was a milder 2.8%, but that was measured before this month's escalation. Higher inflation makes the Bank less likely to cut interest rates, and financial markets are now pricing in the chance of a rate hike by the end of the year rather than a cut, and that shift in expectations is exactly what's pushing swap rates, and fixed mortgage rates, back up.
What it means for you: honestly, nobody, including the lenders, knows for certain which way this goes next, it depends on how the conflict unfolds. What is clear is that rates can now move meaningfully within days, so if you're within six months of needing a new deal, there's a strong case for reserving a rate as soon as you can rather than waiting to see what happens. Most lenders let you switch to something cheaper before completion if a better deal appears, so reserving now costs you nothing if rates fall again, but protects you if they don't. Our guide to what happens when your fixed rate ends and the repayment calculator can help you weigh it up.
Thinking about buy-to-let? What would-be landlords need to know
Letting out a second property is a route quite a few homeowners consider at some point, so this week's homeowner note is a plain-English primer on buy-to-let for anyone wondering whether it could work for them. It's not a decision to rush into, the numbers and the rules both work differently to your own mortgage.
- Lenders look at the rent, not just your income. A buy-to-let application is assessed mainly on expected rental income, typically needing to cover somewhere around 125 to 145% of the mortgage payment, stress-tested at a notional higher rate, rather than your personal salary being the main factor.
- You'll usually need a bigger deposit. Most buy-to-let lenders ask for at least 20 to 25% down, more than the 5 to 10% often possible on a residential purchase.
- There's a stamp duty surcharge. Buying an additional property in England or Northern Ireland attracts a 5% surcharge on top of the normal stamp duty rates, on the whole price, not just the amount above a threshold. Our second-home stamp duty guide and calculator work out the actual bill.
- Mortgage interest relief is limited. Since 2020, individual landlords can't deduct mortgage interest from rental income before working out tax, instead you get a 20% tax credit on the interest paid (rising to 22% from April 2027), which is worth less than a full deduction if you're a higher-rate taxpayer. Owning through a limited company works differently, an accountant can advise which structure suits your situation.
- The tenancy rules changed this year. The Renters' Rights Act abolished Section 21 "no-fault" evictions from 1 May 2026. Landlords now need a specific legal ground under Section 8 to regain possession, so it's worth understanding the new process before you take on a tenant.
Where DS Financial fits, and where it doesn't: sourcing and structuring the right buy-to-let mortgage is exactly what Debbie at DS Financial can help with, checking the rental cover works for the lender you want, comparing rates and fees, and making sure the numbers stack up before you commit. If you'd like your first buy-to-let sense-checked, just drop her a line. Our buy-to-let guide covers the basics in more depth, and if you want it all in one place to keep, we've just put together a free First-Time Landlord's Guide, a 12-page plain-English PDF covering the money, the mortgage, the tax and the 2026 rules. (The tax treatment of rental income and property ownership structures are matters for an accountant, not mortgage advice, figures here are general information, not personal tax advice.)
That's your week. If anything here raises a question about your own situation, just drop us a line, or have a no-pressure chat with Debbie at DS Financial.
General information, not financial, tax or legal advice. Figures correct at the time of writing (18 July 2026). The tax treatment of rental income and property ownership structures should be checked with an accountant.
Sources: Moneyfacts, UK Mortgage Trends Treasury Report, July 2026, Press Association via Yahoo Finance UK, "Average fixed mortgage rates edge higher in blow to borrowers", 16 July 2026, City A.M. via OilPrice.com, "Iran Ceasefire Collapse Sends UK Borrowing Costs to Five-Month High", 14 July 2026, House of Commons Library, "Economic update: Middle East conflict and the UK economy", ONS, Consumer price inflation, UK (May 2026), Bank of England, gilt yields, GOV.UK, Stamp Duty Land Tax rates, GOV.UK, tax relief for residential landlords, GOV.UK, end of Section 21 no-fault evictions.