Prospects of UK interest rate cuts in 2026, widely expected at the start of the year, were dashed when the Iran war began at the end of February. The renewed threat of inflation means the Bank of England is now expected to raise rates at least once this year, keeping mortgage costs higher for longer.
The boss of Britain’s largest housebuilder said on Thursday it was the most challenging time to be a first-time buyer since the 2008 financial crisis. We asked people about their experiences of housing and mortgage rates after the start of the conflict in the Middle East.
Panos, 36, an executive sous chef, and his wife had put in an offer to buy their first house in Hanwell, west London. The interest rate on their mortgage jumped after the war began, from 4.18% to 5.22% on a five-year fixed rate. Their monthly payments would have risen from £2,600 to £3,100. “We could not afford this,” Panos said. “We were heartbroken as we had to pull out.”
Edward, 47, a married father from Staffordshire, sold his house last October and planned to buy within six months. But mortgage rate increases and a lack of suitable properties thwarted his goal. After being served a section 21 eviction notice, the family found a more expensive, smaller rental. “We were betting on interest rates going down,” Edward said. “Then the war happened, and mortgage rates just skyrocketed day by day.”
Jonathan, 49, an academic and single parent from Leicester, was refixing his mortgage at 3.6% when the bank withdrew its offer in April. He secured a new rate of 5.2% fixed for two years, costing an extra £150 a month. He worries he has had to push the repayment date “well beyond” his retirement.
