What’s going on with interest rates, mortgage rates, and the stock market?

I’m Brian Byrnes, Director of Personal Finance at Moneybox. With geopolitical tensions rising, I wanted to share how this is impacting things like inflation and interest rates as well as the direct effects for areas including savings, mortgages, and the stock market.

 

Inflation

The most immediate financial impact of the conflict in Iran has been on oil prices. After sitting between $60-$70 a barrel over the past year, oil has risen above $100 a barrel in the last month.1 Higher energy costs act like a tax on us as consumers but also on businesses, increasing the cost of heating, fuel, and the production of goods and services.

This feeds into inflation. While the UK inflation outlook in January was improving – expected to fall toward the Bank of England’s 2% target – rising energy prices have changed that.2 Inflation is now expected to sit closer to 3-4% for the remainder of 2026, with knock-on effects for interest rates.

 

Interest rates

The Bank of England sets interest rates to balance economic growth and inflation. A month ago, markets expected two base rate cuts in 2026. But with inflation rising, rates could actually increase later this year.

For now, the Bank of England has held the base rate at 3.75% to assess how long the conflict – and its impact on energy – will last.

So, what do these mean for our finances?

 

Savings

One clear positive here is the impact on savings rates. Expectations that interest rates will not be cut, and may in fact go up, have allowed providers to continue to offer competitive rates. As such, it is a good time to make sure your savings are not languishing in a current account or low-interest bank account, offering a rate that is being eroded by higher inflation.

 

Mortgages

Interest rates being higher for longer has caused mortgage rates to increase and deals to be pulled from the market quicker than normal.

If you are planning on buying in 2026 or remortgaging, you should consider speaking to a broker soon. A good broker will help you navigate the market, and can recommend the right deal for you. If rates then move in your favour, your mortgage broker can still secure you a better deal.

It is important to remember that despite geopolitics, it is still possible to get on the housing ladder. Geopolitical events happen quite regularly, and we’ve helped over 100,000 people buy their first home with a Moneybox Lifetime ISA, turning long-term savings into a set of keys.

 

Investments

We have seen volatility in investment markets over the last month as investors try to understand what the impact of the conflict in Iran will be on businesses around the world.

However, such volatility is a normal part of investing, even though the causes feel novel and uncomfortable each time. This time last year, we saw the market fall after President Trump announced his tariff policy. Despite the ensuing weeks of market fluctuations at that time, 2025 ended up being a very positive year for markets, particularly in the UK.

This is the pattern we see repeated time and again. Sadly, we have a lot of evidence about what happens to investments in times of conflict: we often see significant volatility in the short term, with markets recovering in the long term.

This is exactly why whenever anyone talks about investing, they talk about the long term, typically a minimum of five years. It is vital that when markets are down, which happens regularly, you have the ability to ignore short- term fluctuations and allow markets to recover, as they have done time and again. It is not always easy, but the reward is that investments have been shown to be a better protector of long- term wealth than cash.

 

Should this affect your end of tax year planning?

Finally, we are less than two weeks away from the end of the tax year at midnight on April 5. As we know, your tax-free allowances in the UK are ‘use it or lose it’ and do not carry over.

If you were intending to use ISA and/or pension allowances this tax year, you should stick to your plan and try to block out as much of the short-term noise as you can. And remember – ISA, pension, and tax rules apply to account openings and contributions.

It’s vital at times like these that we focus on what we can control and build our emergency funds, house deposits, investments, and retirement pots for the future.

That’s it for this update – I hope you found it useful and some of the information here has helped to put any worries you might have had to rest.