The brief window of falling mortgage rates in the UK has slammed shut as the Iran war triggers a new wave of “Trumpflation.” New figures from Moneyfacts indicate that borrowers are now paying an average of £788 more per year on a two-year fixed deal compared to just two weeks ago. The sudden shift follows the withdrawal of 700 mortgage products as banks scramble to reprice their offerings.
The root cause is the dramatic rise in oil and gas prices following U.S. and Israeli action in Iran. This has forced lenders to raise rates on both two-year and five-year fixed products to levels not seen since the beginning of 2025. The average five-year fix now stands at 5.32%, a move that significantly complicates the financial planning of millions of British households.
Particularly hard-hit are those looking for the “gold standard” of sub-4% rates. The number of such products has plummeted by over 98% in a single week, leaving only nine deals available across the entire market. This “flight to safety” by lenders reflects a deep-seated fear that the conflict will keep inflation high for the remainder of the year.
The Bank of England was expected to signal a more dovish stance this week, but the war has changed the calculus. A hold at 3.75% is now the most likely outcome for Thursday’s meeting. The 1.8 million people due to remortgage this year are now facing a significantly more expensive landscape than they would have just 14 days ago.
Adam French of Moneyfacts describes the current situation as a “wave of volatility.” He warns that until there is more clarity regarding the Middle East conflict and its impact on global energy markets, mortgage rates are likely to remain elevated. For now, the “Trumpflation” effect has made homeownership in the UK a significantly more expensive proposition.