The outlook for mortgage rates has rarely been so uncertain. After falling significantly during June, rates rose again in July as renewed fighting between the United States and Iran pushed up energy prices and revived concerns about inflation.

According to Moneyfacts, the average two-year fixed mortgage rate increased from 5.52% to 5.63% in July, and the average five-year fix rose from 5.52% to 5.66%. This effectively wiped out the reductions seen in June. Even so, lenders are still eager to attract new business, and some have already started cutting selected rates again during August.

Although buy-to-let mortgage rates are slightly higher than residential ones, competition in the sector is even stiffer as lenders chase a smaller pool of landlords buying properties, which were down by around 15% (UK Finance).

Where mortgage rates go from here will depend on future expectations for the base rate. The Bank of England kept it at 3.75% for a fifth consecutive meeting at the end of July, although three of the nine members of its Monetary Policy Committee voted to increase it to 4%, compared with two at its previous meeting. Financial markets are currently pricing in the risk of higher interest rates, largely because of uncertainty over energy prices.

Bank of England Governor Andrew Bailey says: “If the conflict in the Middle East persists for an extended period, for example, and we begin to see signs of emerging second-round effects, it’s likely that we will have to tighten policy to counter inflationary pressures in the UK economy.

“Similarly, if the conflict is credibly resolved in the coming months, the paths would point to a looser policy stance than implied by the market curve. But we do not know how the future will play out, or indeed, if it will play out in a way that resembles any of these projections and scenarios. And that’s because the situation in the Middle East is highly uncertain.”

Below is a selection of this month’s best buys from Moneyfacts.co.uk (remortgages):

Two-year fixed rates: 4.70% from Nationwide BS. Product fee £999. 60% LTV.
4.78% from first direct. Product fee £490. 60% LTV.

Five-year fixed rates: 4.73% from Nationwide BS. Product fee £999. 60% LTV.
4.84% from first direct. Product fee £490. 60% LTV.

Discounted variable: 4.29% From Newbury BS for 3 years. Product fee £850. 75% LTV.br> 4.44% From Bath BS for 2 years. Product fee £999. 80% LTV.

BUY-TO-LET (BTL)

Best two-year fixed rate: 4.78% from HSBC. No fee. 60% LTV.

Five-year fixed rate: 4.59% from NatWest. Arrangement fee £995. 65% LTV.

Best Discounted variable: 4.65% For 5 years. From Newbury BS. Arrangement £950. 75% LTV.

The information we provide is our personal opinion and should not be relied upon for financial advice. Should you need financial advice or guidance, please contact an appropriate professional.