UK mortgage borrowers face potential rate rises after a global bond market sell-off pushed swap rates, which lenders use to price fixed mortgages, to a three-year high. The turmoil was triggered by rising oil prices following clashes between the US and Iran, which stoked fears of higher inflation and prompted investors to sell bonds, driving up yields. Although markets calmed slightly on Thursday, the episode threatens to complicate Prime Minister Andy Burnham's efforts to ease living costs, with borrowing costs remaining elevated.

The five-year swap rate rose above 4.52% on Wednesday, its highest since October 2023, while UK 10-year government bond yields hit levels not seen since 2008 before easing as Brent crude dipped 0.6% to $95 a barrel on Thursday. Yorkshire Building Society's Tom Simpson said swap rates were now 0.7 percentage points higher than a year ago, though the recent 0.1 point rise was smaller than the 0.5 point jump seen after US and Israeli strikes on Iran in March. Average fixed mortgage rates were unchanged on Thursday, with Moneyfacts putting the typical two-year fix at 5.59% and five-year fix at 5.63%.