UK households issued mortgage warning over Iran war | UK | News
UK households are bracing for surges linked to the war in Iran as the ongoing conflict triggers fears of rising inflation. High street lender TSB said it would increase mortgage rates on all fixed rate deals by 0.5% from Wednesday 11 March, just 24 hours after confirming a 0.15% increase. TSB is among a number of mortgage lenders that have started to raise interest rates in the expectation that rising inflation caused by the Iran war will prevent the Bank of England from cutting base interest rates this month.
The bank was previously expected to cut interest rates on March 19, but some predicted it might actually announce an increase as fuel and energy costs soar amid disruption to trade in the Middle East. Santander also plans to raise interest rates by 0.24% on Wednesday, following increases by Barclays and Halifax on Tuesday, March 10. Ken James, director of London-based Contractor Mortgage Services, urged borrowers to lock in mortgage deals quickly and warned that TSB’s rate knob could be “permanently stuck on ‘boost'” and other lenders “will follow”.
He told Newspage: “Mortgage brokers on social media and other platforms are sending a clear message that deals can disappear quickly, with lenders repricing at a record pace. “The safest strategy may be to secure a rate while it’s still available.
“If you’re on the fence about locking in a mortgage deal, you need to put on your skates because at the current pace, rates may have risen again by the time you finish reading this.”
Simon Bridgland, broker at Canterbury-based Charwin Private Clients, said in such a “rapidly changing environment” it was “no surprise that lenders are scrambling to keep up and plan ahead”.
He added: “When the wind shifts again on interest rates, will borrowers band together to seek refuge in higher rates, or will lenders give them a good opportunity to reverse the rapid increases? You can bet your bottom dollar that those dealing directly with a lender will not be notified of reductions in time for the borrower to take action and get a better deal before their loan is finalized.”
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Professor David Miles, a member of the OBR’s budget accountability committee, told MPs on the Treasury Committee that oil prices were around 20% higher than before the conflict escalated, while gas prices were up 50%.
He said: “If prices do not change from where they are at the moment (both spot prices and market expectations of future prices, which is particularly important for the Ofgem price cap), we think the inflation rate will finish the year closer to 3% rather than closer to 2%.
“It is important, it is important, but it is not yet on the same scale as what we experienced after the Russian invasion of Ukraine. [But] It is remarkable enough and very unwelcome, because there is no upside to all this; we are major importers of both oil and gas. These are nothing but negative effects of higher price increases.
“I probably would have given you a different answer yesterday morning, and by the end of the week it might look different again. It’s unclear which way we go from here.”
