Two leading lenders are set to raise mortgage rates amid fears that the conflict in Iran will drive up inflation.

Nationwide Building society is putting some of its fixed rates up by 0.25 percentage points tomorrow while HSBC is also raising rates — but wouldn’t say how much. Coventry Building Society plans to put up its fixed rates on Monday.

It is thought that war in the Middle East, which has already sent oil and gas prices soaring, could reverse months of falling inflation in the UK. The price of a barrel of Brent crude oil has risen to $83,
its highest level in nearly two years, while the price of natural gas has risen from 77p per therm to 131p since Friday.

The Bank of England had been expected to cut its base rate of interest from 3.75 per cent later this month, but economists now think this unlikely.

The Bank sets the base rate to try to keep the consumer prices index measure of inflation as close to 2 per cent as possible. It was 3 per cent for the year to January. The higher the rate of inflation, the more likely the Bank is to hold or increase the base rate.

Swap rates — which lenders use to price fixed mortgage rates — have risen about 0.2 percentage points since the US and Israel launched strikes on Iran over the weekend.

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Hina Bhudia from the mortgage broker Knight Frank Finance said: “This doesn’t yet represent a market-wide repricing, but these lenders are unlikely to be the last given the move in swap rates we have seen since the weekend. For those able to lock in a rate now, now would be a good time.”

David Hollingworth from the mortgage broker L&C said: “The conflict has led the market to expect higher inflationary pressure to cause base rate cuts to be slowed or put on hold.

“That pushes up the cost for lenders when setting fixed-rate mortgages, which can force prices higher. Once we enter a cycle of lenders adjusting rates, we know that it almost invariably results in others following suit.”

Some 1.2 million mortgage holders have fixed deals that are due to end in the next six months, according to the Financial Conduct Authority, the City regulator. They should consider securing a new deal now. You can often lock in a new rate up to six months in advance of your deal ending and can still switch if a better deal comes along.

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The lowest two-year fixed rate for someone remortgaging now is 3.68 per cent from NatWest, available at up to 60 per cent loan-to-value (LTV) with a £1,495 fee. The lowest five-year fixed rate is 3.79 per cent from First Direct at the same LTV, with a fee of £490.

Bhudia said: “Any deal can be renegotiated if rates begin easing again. But that looks unlikely in the near term.”