A million more UK homeowners are facing higher mortgage bills than the Bank of England had previously expected – a direct consequence of the Iran war, according to the central bank’s latest Financial Stability Report. Just over five million households should now anticipate their monthly repayments to increase by the end of 2028, up sharply from the four million the Bank had forecast in December.
While the overall hit will not be as severe as the mortgage crunch of 2022–2024, the numbers are still stark. For a typical owner-occupier rolling off a fixed-rate deal in the next two years, the Bank projects an average rise of £45 per month – far less than the £120 jump seen by those who remortgaged during the recent peak. But for 750,000 homeowners who are still paying less than 3% interest on their existing deals, the blow will be far heavier. The Bank warns they will face an average increase of £170 a month when they refinance this year.
“One million more UK homeowners face higher mortgage bills due to Iran war, Bank of England says.”
Saima Siddiqui, 33, is about to become one of them. She bought her one-bedroom flat in Surrey five years ago, locking in a 1.8% fixed rate. Now, as she prepares to remortgage for the first time, the shock is real. “It means I’m going to have to be more careful with other things,” she says. “It was alright as it was, but the extra £200 means I’m going to have to budget a lot more carefully.”
Living alone, Siddiqui had managed comfortably on her original deal. “It was quite a surprise that the jump was so much. I know I had a good deal, but it is quite worrying. If it does continue to increase in the same way, it is difficult to continue to live at the same standard if your salary doesn’t increase in the same way.”
More than eight in ten mortgage customers in the UK now have fixed-rate deals, meaning their interest rate is frozen until the deal expires – typically after two or five years – and they must then choose a new product. The Bank’s report offers some relief for more than two million borrowers whose two-year fixed deals expire by the end of 2028: they are projected to remortgage close to their existing rate, seeing little change in repayments. Yet even these borrowers are unlikely to see the falls in payments that the Bank had forecast before the Iran conflict.
The question now is whether the upward pressure on mortgage costs will persist, and how many more households will be forced to tighten their belts as the full impact of global instability filters through to their monthly bills.