Bank bosses called to meeting with Reeves over impact of Iran war on UK economy | Economics

Bosses of Britain’s “big five” retail banks have been summoned to a meeting with Chancellor Rachel Reeves this week to discuss how to limit the economic impact of the crisis in the Middle East triggered by US and Israeli attacks on Iran.

Senior executives from HSBC, Barclays, Lloyds, NatWest and Santander have been asked to attend an emergency summit at a time when there is growing recognition that a major economic blow from the Iran war is inevitable.

Talks will focus on how to protect those most vulnerable to ripple effects, with a particular focus on borrowers bracing for mortgage interest rates to rise, Treasury sources said.

This will include an update on banks’ commitment to support 1.6 million customers whose fixed-rate deals under the government’s mortgage contract expire between now and the end of the year. Lenders have already written to customers in this position outlining their options.

Rising energy prices in recent weeks have led to gloomy forecasts of rising inflation and mortgage costs after Iran retaliated by blocking the U.S. and Israel’s Hormuz shipping route and attacking its oil-producing neighbors.

The Bank of England has predicted that the cost of lending to homes for more than 1 million households in England could increase.

In this scenario, forbearance from major mortgage lenders could be key to preventing a major shock to the economy.

The meeting, first reported by Sky News, could also lead to banks being asked to provide an early insight into how consumers are behaving in the face of the unfolding crisis.

Tensions caused by conflict in the Middle East have led banks to withdraw about 1,500 mortgage products and many to raise interest rates on the remaining 7,000 mortgage products, the bank’s financial policy committee said earlier this month.

The increases, dubbed “Trumpflation” in memory of the US president, put pressure on households preparing to sign new mortgage contracts; The bank currently estimates that about 5.2 million borrowers — or roughly 58% of borrowers nationwide — could face higher mortgage payments by the end of 2028.

Banks are finalizing their year-end results and many are likely to include revised outlooks for the UK economy.

The Guardian has approached the Treasury and banks for comment.