Prospects of UK interest rate cuts in 2026, widely expected at the start of the year, were dashed when the Iran war began in late February. The conflict has reignited inflation fears, with the Bank of England now expected to raise rates at least once this year, keeping mortgage costs higher for longer.
Panos, 36, an executive sous chef, and his wife had offered to buy their first home in west London but saw their mortgage rate jump from 4.18% to 5.22% after the war began. Their monthly payments would have risen from £2,600 to £3,100, forcing them to pull out. 'We were heartbroken,' Panos said. 'I can't believe something happening on the other side of the world is affecting England.'
Edward, 47, a producer from Staffordshire, sold his house last October expecting rates to fall. After the war, mortgage rates 'skyrocketed day by day.' The family now rents a smaller, more expensive property and has had to lower their expectations for a new home. 'No one seems to be listing at the moment,' he said.
Jonathan, 49, an academic from Leicester, saw his mortgage refix rate rise from 3.6% to 5.2% after his bank withdrew its offer. He now pays an extra £150 a month and fears pushing his repayment date 'well beyond' retirement. The boss of Britain's largest housebuilder called it the most challenging time for first-time buyers since 2008.
