Warning: Iran War ‘Shock’ Could Push Up Mortgages for 1.3m Homeowners

UK Economic Outlook Deteriorates Amid Middle East Tensions

The Bank of England warned that a Middle East conflict could lead to increased mortgage payments for around 1.3 million UK households by late 2028. Its latest economic risk assessment highlighted potential borrowing cost hikes due to global instability caused by the war. This projection builds on earlier forecasts, which anticipated 3.9 million households facing mortgage rate rises within two and a half years.

Since US-Israel strikes on Iran escalated a month ago, energy markets have seen sharp spikes, with oil and gas prices climbing significantly. Government borrowing expenses have also surged, creating additional strain on the economy. The Financial Policy Committee noted these developments might slow growth and raise inflation, marking a decline in the UK’s economic outlook.

Blockquote: “The scale of those increases would ‘remain modest’ compared with recent years, such as after the mini-budget in 2022.” The report emphasized that while mortgage costs are set to rise, the magnitude of the impact would be less intense than previous shocks. However, sustained high energy and mortgage expenses could amplify pressure on families and businesses.

Despite these challenges, the Bank indicated that the financial sector, including banks, has shown resilience so far. Markets have absorbed major fluctuations since the conflict began, preventing widespread economic collapse. The committee expressed confidence that the UK’s banking framework could endure more severe economic and financial challenges than anticipated.