New mortgages up by £800 a year amid ‘Trumpflation’ from Iran war | Mortgages
As ‘Trumpflation’ pushes up mortgage rates in the UK, Britons taking out new mortgages face paying an average of £800 more a year than before the Iran war, according to Moneyfacts.
Nearly 700 mortgage deals were struck by lenders as the economic consequences of the war caused the biggest upheaval since Liz Truss’s disastrous mini-budget of 2022.
“The 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 looking for a fixed-rate deal,” said Adam French, head of consumer finance at data firm Moneyfacts.
“The two-year average fixed rate has jumped from 4.83% at the beginning of March to 5.28% today, its highest level since April 2025. The five-year average fixed rate is now 5.32%, from 4.95%, its highest level since February 2025.”
French explained that for a borrower with a £250,000 mortgage over 25 years, this is equivalent to paying £788 more a year for a two-year fix, or £651 more for a five-year deal, than just two weeks ago.
The rise in mortgage costs has been a blow to buyers and those hoping to re-mortgage. Around 1.8 million fixed-rate deals are expected to expire in 2026, and many of these borrowers will need to take out a new mortgage.
The change of direction came amid global shockwaves caused by the war. Before the clash, economists were predicting two rate cuts in 2026, following the four the Bank of England announced last year.
The major concern now is that higher oil and gas prices will increase inflation. This uncertainty has increased the money market exchange rates that lenders use to decide new fixed mortgage rates.
Financial experts now expect the Bank to keep interest rates at 3.75% with cuts at Thursday’s policy meeting. Before the war, the central bank was expected to cut interest rates on Thursday.
If inflation rises, some commentators say interest rates could rise before the end of the year.
According to Moneyfacts data, there are only nine fixed-rate deals on the market with rates below 4%; That’s a sharp drop from 490 at the beginning of last week.
“Elections continue to decline as lenders make deals and reprice in response to skyrocketing financing costs,” French said. “Borrowers may need to be prepared for further volatility in the coming weeks as the global economy braces for a wave of ‘Trumpflation’ from US- and Israeli-led action against Iran.”
