British homeowners are facing a sharp spike in borrowing costs as the economic fallout from the war in Iran ripples through the UK financial sector. According to new data from Moneyfacts, the average annual mortgage bill for new borrowers has jumped by nearly £800 in just two weeks. This rapid escalation, dubbed “Trumpflation,” reflects the global market’s reaction to the U.S. and Israel’s military engagement in the Middle East.
The scale of the disruption is staggering, with lenders pulling nearly 700 mortgage deals from the market in a matter of days. This represents the most volatile period for UK lending since the aftermath of the 2022 mini-budget. Adam French, head of consumer finance at Moneyfacts, noted that the average two-year fixed rate has surged from 4.83% at the start of March to 5.28% today, hitting its highest level in nearly a year.
For a typical borrower with a £250,000 loan over 25 years, these rate hikes translate to an extra £788 per year on a two-year fix. Five-year fixed rates have followed a similar trajectory, rising to 5.32%. The shift is a massive blow to the 1.8 million households due to remortgage in 2026, many of whom had been holding out for rate cuts that now appear increasingly unlikely.
Prior to the conflict, economists had predicted multiple interest rate cuts from the Bank of England this year. However, surging oil and gas prices have reignited inflation fears, causing “swap rates”—the price lenders pay for money—to climb. Consequently, the Bank is now expected to hold interest rates at 3.75% during its meeting this Thursday, with some analysts even warning of potential hikes later this year.
The availability of “sub-4%” mortgages has virtually evaporated, plummeting from 490 deals to just nine in a single week. Industry experts warn that borrowers should prepare for continued volatility as the global economy adjusts to the “Trumpflation” wave. For those looking to secure a rate, the window of opportunity is closing faster than at any point in the last three years.