The Bank of England is expected to keep interest rates at 3.75 per cent this week even as the cost of home loans creeps higher on renewed fears the Iran war could drag on beyond the summer. 

More than a dozen lenders – including Halifax, Santander and Yorkshire Building Society – have raised their mortgage rates over the past fortnight, according to financial data firm Moneyfacts.

The moves take the average fixed rate for borrowing over a five-year period back to where it was in June at 5.61 per cent.

Prolonged tensions in the Gulf have hit the ‘swaps’ market, which sets fixed-rate mortgage costs, as concerns over the global supply of oil saw the price of a barrel of Brent crude top the $100 mark last week.

Rate-setters on the Bank of England’s Monetary Policy Committee are likely to ignore the effect of intended counter-inflationary measures unveiled by the new Government to ease cost-of-living pressures such as cutting VAT on electricity bills to 5 per cent.

‘The policy changes announced so far are helpful at the margin for the inflation outlook, but ultimately small beer, not a gamechanger,’ said economists at investment bank Investec.

The protracted Iran war has extinguished any hopes of an interest rate cut to ease the financial burden on households and firms. 

Traders now expect two increases in the Bank of England base rate this year, with the first in September.