Donald Trump's military action in Iran has driven up mortgage costs in London by over £1,100 for a typical two-year fixed-rate deal in just two weeks, according to analysis by Moneyfacts. The average two-year fix rose from 4.83% at the start of March to 5.28%, its highest since April 2025, adding £1,104 annually on a £350,000 mortgage over 25 years.
The increase stems from the oil crisis triggered by Iran effectively closing the Strait of Hormuz, which has pushed up inflation expectations and reduced the likelihood of further Bank of England interest rate cuts. Money market rates have risen sharply, forcing lenders to increase fixed mortgage rates. The average five-year fix also climbed from 4.95% to 5.32%, adding £911 per year on the same loan amount.
Mortgage product availability has fallen by 689 since 9 March, the sharpest drop since Liz Truss's mini-budget in September 2022. Adam French, head of consumer finance at Moneyfacts, warned that rates could rise further as the global economy faces a 'Trumpflation' wave from US and Israeli-led action in Iran.
The government has not ruled out petrol rationing if the conflict continues. Treasury minister Dan Tomlinson said motorists should continue driving normally for now but acknowledged the situation is being monitored. Chancellor Rachel Reeves has announced £50 million in support for home oil heating bills and may intervene to protect poorer households from gas and electricity price hikes, though not better-off families.
