Analysis indicates that mortgage payments could surge by more than £3,000 annually under a worst-case scenario if expenses continue to climb due to the ongoing Iran conflict.
The conflict has led to an increase in mortgage expenses as lenders have adjusted to the expectation that interest rates will not decrease as previously forecasted.
Moneyfacts conducted an analysis based on the Bank of England’s recent stress test scenarios, projecting potential inflation spikes.
In the most optimistic scenario, with inflation peaking at 3.6% this year and dropping below 3% by the following autumn, homeowners might face additional annual costs ranging from £150 to £1,050.
In a moderate scenario, where inflation hits 3.7% and remains elevated, mortgage holders could see an extra expense of £1,050 to £1,950 per year.
JOIN OUR WHATSAPP GROUP: Receive money news and top deals directly on your phone by joining our Money WhatsApp group here. Exclusive offers, promotions, and advertisements from us and our partners are available to our community members. If you wish to leave our community, you can do so at any time. For more details, you can review our Privacy Notice.
However, in the worst-case scenario of 6.2% inflation, households may face an additional annual expense of £3,380.
According to Moneyfacts’ analysis, the average two-year fixed rate has surged from 4.83% in early March to 5.77% currently.
Similarly, the average rate for a five-year deal has climbed from 4.95% to 5.68% over the same period.
Adam French, Head of Consumer Finance at Moneyfacts, emphasized the potential economic consequences of the Iran conflict highlighted by the Bank of England’s stress scenarios.
He stated, “The Bank of England’s ‘Trumpflation’ stress scenarios reveal the severe economic impact that could result from the Iran conflict.”
French also advised borrowers to consider securing a new mortgage deal promptly as a precaution against potential rate hikes in the future.
Most lenders offer the