Mortgage Rates Rise, UK Prices Fall

What's happened

As of early April 2026, US 30-year fixed mortgage rates have climbed to 6.37%, up from under 6% six weeks ago, driven by the Iran war's impact on energy prices and inflation fears. This rise is slowing US home sales and mortgage applications during the spring buying season. In the UK, house prices fell 0.5% in March, slipping below £300,000, with mortgage rates rising above 5%, signaling a cooling housing market.

What's behind the headline?

Rising Mortgage Rates and Inflation Expectations

The Iran war has triggered a surge in oil prices, which has heightened inflation fears globally. This has pushed up the yield on 10-year US Treasury bonds, a key benchmark for mortgage rates, causing US 30-year fixed mortgage rates to rise from under 6% in late February to 6.37% by early April. The UK has experienced a similar trend, with mortgage rates climbing above 5%, the highest since mid-2024.

Impact on Housing Markets

• United States: Higher mortgage rates have slowed mortgage applications and home sales during the traditionally busy spring season. Buyers face increased monthly costs, reducing affordability and bargaining power. However, increased inventory and longer selling times have created a more buyer-friendly market, with sellers offering concessions.

• United Kingdom: UK house prices fell 0.5% in March, dropping below £300,000. The rise in mortgage rates and inflation concerns have cooled the market, with lenders withdrawing hundreds of mortgage deals. Regional disparities persist, with Northern Ireland and Scotland showing stronger price growth, while London and the southeast see declines.

Economic and Policy Context

Central banks in both countries face pressure as inflation risks rise. The US Federal Reserve's rate decisions influence Treasury yields and mortgage rates, while the Bank of England signals possible rate hikes to counter inflation above 3%. Economic growth in the UK remains weak, with zero GDP growth in January and subdued activity in housing construction.

Outlook

Mortgage rates are unlikely to fall soon given persistent inflation risks tied to energy prices. This will continue to restrain housing demand and price growth in both countries. Buyers will remain cautious, and affordability challenges will persist, especially for first-time buyers. The housing market's recovery depends on geopolitical developments and central bank policies in the coming months.

How we got here

Mortgage rates had been declining early in 2026, reaching below 6% in the US and supporting modest UK house price growth. The outbreak of the Iran war in late February caused oil prices to surge, raising inflation expectations and pushing up US Treasury yields. This led to rising mortgage rates in both countries, dampening housing market momentum and increasing borrowing costs.

Our analysis

The New York Times highlights the direct link between the Iran war, rising oil prices, and mortgage rates, noting that "markets are going to continue to price higher inflation risks, which will translate into higher mortgage rates" (Gregory Schmidt, NYT). The Independent and AP News provide detailed accounts of how these rising rates have slowed mortgage applications and home sales in the US, with real estate agents reporting a buyer-friendly market due to increased inventory and seller concessions. In the UK, The Guardian's Joanna Partridge reports that house prices fell 0.5% in March, with mortgage rates rising above 5%, the highest since mid-2024, and lenders pulling hundreds of mortgage deals. Nationwide's chief economist Robert Gardner warns that the Middle East conflict has "clouded the outlook" and that rising energy costs and inflation expectations will soften housing market activity. The Independent's Vicky Shaw adds that the UK economy's weak growth and rising inflation pressures make rate cuts unlikely, further challenging affordability. These sources collectively illustrate a housing market under pressure from geopolitical tensions, inflation fears, and central bank responses, with both US and UK buyers facing higher borrowing costs and subdued market activity.

Go deeper

• How has the Iran war affected mortgage rates?
• What is the outlook for UK house prices this year?
• Are mortgage rates expected to fall soon?

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