Why Do Oil Prices Affect UK Mortgage Rates?
Oil at $112, mortgage fixes at 5.8%, and the Bank of England holding at 3.75%. This is the one kind of inflation rate rises cannot fix. Your monthly payment is the casualty.
UK mortgage rates after the oil shock
Brent at $112, 2-year fixes up roughly 100bps in a single month.
Key takeaways
Oil prices have surged past $112/barrel following the US-Israeli strikes on Iran and the Strait of Hormuz blockade, removing roughly 5 million barrels a day from global supply.
Oil-driven inflation is a supply-side shock, meaning central banks cannot fix the root cause with interest rates, but they still have to respond to the price rises it creates.
Average UK two-year fixed mortgage rates have jumped to 5.84%, up a full percentage point in a single month, with the Bank of England widely expected to hold at 3.75% or even hike.
Homeowners should stress-test their budgets now, consider overpaying or locking in a fix early, and resist panic selling investments to cover short-term cost increases.