UK mortgage borrowers face higher costs as two-year swap rates climbed to 3.60%, the highest level since October. The surge follows escalating Middle East tensions after US-Israeli strikes on Iran, which have driven oil and gas prices higher and reignited inflation fears. Lenders use these swap rates to price mortgage products, making the increase directly relevant to homeowners.

Moneyfacts Group reports the average two-year fixed-rate mortgage rose to 4.83% on Thursday, with five-year rates at 4.95%. The sharp movement in swap rates has prompted some lenders to pause or reconsider planned rate reductions. This volatility comes as traders abandon expectations for a second Bank of England interest rate cut this year amid inflation concerns.

Taylor Wimpey CEO Jennie Daly said the housebuilder is "watching" the recent swap rate increases, noting their impact depends on how long Middle East conflict continues. The housing market has already struggled with elevated mortgage costs since the end of cheap money in 2022, and this latest development threatens to prolong the affordability crisis for UK homeowners.