Prospects of UK interest rate cuts in 2026, widely expected at the start of the year, have been dashed by the onset of the Iran war in late 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.
Panos, 36, an executive sous chef, and his wife had offered to buy their first home in west London, but the mortgage rate jumped 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, adding that they will continue renting until rates improve.
Edward, 47, from Staffordshire, sold his house in October expecting rates to fall, but the war caused mortgage rates to 'skyrocket day by day.' After receiving a section 21 eviction notice from their rental, they found a more expensive, smaller place. They have had to revise their expectations and now consider properties they would have previously rejected.
Jonathan, 49, an academic from Leicester, was in the process of refixing his mortgage at 3.97% when the bank withdrew its offer in April. He secured a new rate of 5.2% fixed for two years, costing an extra £150 per month. He worries he will have to push the repayment date beyond retirement.
The boss of Britain's largest housebuilder described this as the most challenging time for first-time buyers since the 2008 financial crisis. Many are now waiting for rates to fall before making their next move.
