Oil prices and UK mortgage costs

Between October 2024 and September 2026, monthly oil-price changes and quoted two-year fixed mortgage-rate changes had a strong correlation of +0.71. Pearson’s correlation coefficient (r) measures the strength and direction of the linear relationship between two variables, with a value of +0.71 indicating a strong positive correlation, meaning that as one variable increases, the other tends to increase too.

Higher mortgage offers affect new borrowers and households refinancing, while existing fixed-rate borrowers keep their contracted rate until their deal ends. The mortgage measure is a quoted two-year fix at 75% loan-to-value, excluding fees. [1]

Higher energy prices can raise expected inflation. Investors may then expect the Bank of England to keep interest rates higher for longer. Market rates respond, and lenders can raise fixed mortgage offers before the inflation fully appears. [5, 7]

In 2026, the Middle East conflict increased energy-supply and inflation concerns. By July, the Bank reported that quoted two-year mortgage rates had risen 0.79 percentage points since 27 February, slightly less than the corresponding market rate (OIS) increase. [5, 6, 7]

Daily sterling Brent, wholesale gas and OIS observations are averaged monthly. Energy-price log changes are correlated with rate changes in basis points. These associations do not prove causation. Relationships vary over time: the oil–mortgage changes correlation largely breaks down for long periods if we look back further, with inflation expectations typically shaped by oil prices only episodically.