Swap rates have increased since the start of the Iran conflict, which in the long-term results in higher mortgage rates.
Since the start of the war the average daily 1 year swap rate rose by 0.26%, while the average daily 5 year swap rate increased by 0.22%, analysis from specialist lender Octane Capital has found.
Despite this worry, swap rates are still lower year-on-year.
Jonathan Samuels, chief executive of Octane Capital, said: “Global events will always have a ripple effect across financial markets, and the recent escalation in tensions in the Middle East is no exception, with swap rates reacting accordingly in the short term.
“Given this recent upward movement, it would be no surprise to see the Bank of England hold the base rate in the near term as it assesses the wider impact of these developments, however, it’s important to keep this movement in context.
“While swap rates have edged up in recent weeks, they remain notably lower than they were at the same point last year, and this is what continues to support a more favourable borrowing environment overall.
“Short-term fluctuations will always occur, particularly in response to geopolitical events, but the underlying trajectory of the market remains far more stable and supportive than it was this time twelve months ago.”
Between 1st January and 16th March the average 1 year swap rate has fallen by -0.59% compared to the same period in 2025, while the average 5 year swap rate is down -0.30% year-on-year.
These reductions are notably larger than the increases seen since the start of the Iran conflict, highlighting that recent upward movement in swap rates represents a short-term reaction rather than a reversal of the wider downward trend.
