Britons taking out a new home loan face paying almost £800 more per year on average than before the Iran war, as 'Trumpflation' pushes up UK mortgage rates, according to Moneyfacts. Nearly 700 mortgage deals have been pulled by lenders in two weeks, marking the biggest upheaval since the aftermath of Liz Truss's mini-budget in 2022.
Adam French, head of consumer finance at Moneyfacts, said: 'War in the Middle East has added almost £800 to a typical annual mortgage bill in just two weeks, which will be unwelcome news for anyone currently seeking a fixed-rate deal.' The average two-year fixed rate has risen from 4.83% at the start of March to 5.28% today, while the average five-year fix has increased from 4.95% to 5.32%.
For a borrower with a £250,000 mortgage over 25 years, that equates to paying £788 more annually on a two-year fix, or £651 more on a five-year deal compared with a fortnight ago. The upward march of home loan costs is a blow to buyers and those hoping to remortgage, with about 1.8 million fixed-rate deals due to end in 2026.
The change of direction comes amid global shock waves caused by the war. Before the conflict, economists had anticipated two cuts to UK interest rates in 2026 after four cuts last year. Now, higher oil and gas prices stoking inflation have pushed up money market swap rates used by lenders to set mortgage rates. Financial experts expect the Bank of England to hold rates at 3.75% at its policy meeting on Thursday, with cuts off the table.
There are now only nine fixed-rate deals with rates below 4% on the market, sharply down from 490 at the start of last week. French added: 'Choice continues to fall as lenders pull deals and reprice in response to rapidly rising funding costs. Borrowers may need to brace for further volatility in the weeks ahead as the global economy braces for a “Trumpflation” wave flowing from the US- and Israel-led action in Iran.'
