Mortgage rates have done a U-turn twice this year
Mortgage rates have done a U-turn twice this year At the start of 2026, the direction of mortgage rates looked clear.
Two-year fixed rates had been easing to approximately 4.25% by February, and there was broad expectation that the trend would continue downward through the year. Then the conflict in Iran began in late February and the trajectory reversed sharply. Rates climbed, lenders repriced their products, and the affordability picture that buyers and remortgagers had been planning around changed quickly. As of Rightmove’s July 2026 House Price Index data, the average two-year fixed rate stands at 4.92%. The market has now reversed twice, and understanding what that means in practice is more useful than any single rate figure.
The first reversal: How the conflict changed the picture
The Iran conflict pushed borrowing costs higher almost immediately after it began. Mortgage rates are priced using swap rates, which reflect what financial markets expect interest rates to do over the next two to five years rather than today’s base rate position. When energy prices surged and inflation expectations shifted, swap rates moved with them, and lenders adjusted fixed-rate products within days. The two-year fixed rate moved from approximately 4.25% in February to a spring high of around 5.35% in April, reversing several months of gradual improvement in a matter of weeks. Buyers who had been modelling their affordability at the earlier rates found the monthly cost of a given purchase had increased, and some paused their plans while the picture became clearer.
The second reversal: Rates beginning to ease
The more recent movement is in the opposite direction. Rightmove’s mortgage data showed the average two-year fixed rate at 5.18% in May, still elevated but already beginning to ease. By June the rate had fallen to 5.07%, and by the July index it had eased further to 4.92%. The direction is consistent and reflects lenders competing actively for borrowers as swap rates have stabilised from their spring peak.
For buyers who had been tracking rates closely, the July figure represents a meaningful improvement from the spring high, even if it remains above where the year began. Each reduction in the average rate reduces the monthly cost of a typical purchase by a measurable amount, and that cumulative easing through the summer has gradually improved affordability relative to the conditions of April and May.
What this means if you are buying
A rate of 4.92% on a two-year fix is higher than buyers were expecting at the start of the year. It is also lower than the spring peak, and the direction of travel over recent months has been consistently downward. For buyers who are financially prepared and have found a property that works for them, the current rate environment is more stable than it was in the spring, even if it has not returned to where it was in January.
There is no reliable way of knowing when or whether rates will fall further. The choice between acting on current rates and waiting for a better position involves a trade-off between cost certainty now and the possibility of lower payments later, offset by the reality that property values and competing buyer numbers may both move in the interim. A whole-of-market mortgage broker, reviewing the full range of available products, can help assess what is genuinely available against a buyer’s specific circumstances.
What this means if you are remortgaging
For homeowners approaching the end of a fixed-rate deal, the key practical point is that rates are currently lower than they were at their spring peak. Beginning the review process early, rather than allowing a deal to lapse onto a standard variable rate, gives the widest possible access to current product availability and the option to lock in a rate while monitoring for further changes.
Talk to our team about your mortgage options
This article was originally published by BriefYourMarket and is reproduced here with their permission.
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