Will Britons see mortgage rates fall as result of Iran ceasefire?

Households across Britain will be hoping that Donald Trump's 14-day ceasefire could reverse some of the mortgage rate hikes seen in recent weeks.

Last night, the US president declared that Iran and the US had agreed to a two-week ceasefire that will open the Strait of Hormuz.

As a result, the price of oil fell back below $100 a barrel and stock markets have since rallied around the globe.

This has raised hopes that inflation may not increase as much as previously expected on the back of the conflict.  

However, oil prices are still higher than before the conflict started on 28 February, when it was around $70 a barrel. 

Higher oil prices drive up the cost of petrol and energy bills, as well as other household essentials such as food, which contributes to inflation. 

Mortgage rates have already risen by more than 1 percentage point since the start of the war in Iran. 

The lowest fixed rate deals have gone from around 3.5 per cent in February to around 4.75 per cent in a matter of weeks.

While most households on fixed rate deals are protected from this volatility, some 1.8 million homes are due to remortgage this year - and many of these are likely to be rolling off very low rates taken out five years ago at between 1 and 2 per cent.

Someone moving a £200,000 mortgage from 1 per cent to 4.75 per cent could expect to see their monthly costs go from £753 to £1,140 a month, with a repayment term of 25 years.

Property experts now say that the ceasefire could slow down the pace of mortgage rate rises, however. 

Justin Moy, managing director at Chelmsford-based EHF Mortgages, said it could lead to a 'welcome pause to the daily rate increases suffered by borrowers over the past month or so.'

He said home buyers were likely to see bigger rate cuts than those remortgaging, however.

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'I would expect lenders to prioritise purchase deals in the short term, given we are in the middle of what is traditionally the peak home-buying season. For those remortgage borrowers looking for significant rate cuts and a better deal, you may need to hold on for a little longer,' Moy added.

Babek Ismayil, chief executive at home buying website OneDome also thinks that rate rises will be paused. 

'For now at least, we may not see further rate rises as lenders and markets assess and monitor events in the Middle East,' he said. 

'It's hard to know what Trump will do next and that uncertainty alone will prevent a sudden repricing downward of rates in the short term. But the ceasefire and reopening of the Strait of Hormuz offers some hope.'

However, Samuel Mather-Holgate, managing director at Swindon-based Mather and Murray Financial, warned that damage of the war is already baked in, and while there may be a pause in mortgage rate rises, they could start again in the near future.

'Even if this ceasefire is reality, the damage to Western economies and inflation is already done,' he said. 

'Gilt rates may move down today, but not enough to stave off mortgage rate rises for the next six months.'

How to find a new mortgage

Mortgage rates have soared after conflict with Iran has driven up inflation expectations and dashed hopes of interest rate cuts.

If you need a mortgage because you are buying a home, or your current fixed rate deal is due to end, you should explore your options as soon as possible.  

This is Money has a long-standing partnership with fee-free broker L&C, to provide you with expert mortgage advice.

Use This is Money and L&Cs best mortgage rates calculator to show deals matching your home value, mortgage size, term and fixed rate needs.

Or use L&C’s online Mortgage Finder to search thousands of deals from more than 90 different lenders to discover the best deal for you.

This is Money's mortgage tips 

What if I need to remortgage? 

Borrowers should compare rates, speak to a mortgage broker and be prepared to act. Homeowners can lock in to a new deal six to nine months in advance, often with no obligation to take it.

Most mortgage deals allow fees to be added to the loan and only be charged when it is taken out. This means borrowers can secure a rate without paying arrangement fees. If you do this and don't clear the fee on completion, interest will be paid on it over the term of the loan.

What if I am buying a home? 

Those with home purchases agreed should also aim to secure rates as soon as possible, so they know exactly what their monthly payments will be. Buyers should avoid overstretching and be aware that house prices may fall, as higher mortgage rates limit people's borrowing ability and buying power.

What about buy-to-let landlords?

Buy-to-let landlords with interest-only mortgages will see a greater jump in monthly costs than homeowners on residential mortgages. This makes remortgaging in plenty of time essential and our partner L&C can help with buy-to-let mortgages too. 

> Find your next mortgage deal with This is Money and L&C

Mortgage service provided by London & Country Mortgages (L&C), which is authorised and regulated by the Financial Conduct Authority (registered number: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage