One million extra homeowners will face higher mortgage bills because of the fallout from Donald Trump's Iran war, the Bank of England has warned, lifting…
One million extra homeowners will face higher mortgage bills because of the fallout from Donald Trump's Iran war, the Bank of England has warned, lifting the total number of affected households to five million over the next two years.
Why the Bank raised its warning to one million extra households
Back in December, the Bank had estimated that four million households would see repayments climb as they came off fixed rate deals. That figure has now jumped to five million, a rise of one million, as borrowing costs have pushed higher following the conflict triggered by Trump's campaign against Iran. The average rate on a two year fixed mortgage has risen from 4.2 percent in December to 4.92 percent now, according to Bank figures.
The shift matters because remortgaging is not optional for most households. Fixed deals expire on a schedule set years earlier, and borrowers have little choice but to accept whatever rates are available when their term ends, regardless of what is happening in financial markets at the time.
Who gets hit hardest
The pain will not be spread evenly. Households rolling off a fixed rate over the next two years face a relatively modest increase of around £45 a month on average. But roughly 750,000 families who locked in mortgages before 2022, when rates sat below 3 percent, face a much steeper jump. Those borrowers, who must remortgage by December this year, are looking at an average rise of £170 a month, according to the Bank's assessment.
That group is effectively facing the full force of the rate cycle at once, moving from ultra cheap pandemic era deals straight into a market shaped by war driven borrowing costs.
The timing adds pressure on Andy Burnham, the presumptive prime minister, who has built much of his political pitch around lowering the cost of living for ordinary households. Inheriting a housing market where a million more people are bracing for higher bills is not the backdrop he would have chosen on taking office.
Hedge funds and the AI stock bubble risk
Separately, the Bank's Financial Policy Committee flagged a different kind of danger building in markets. Officials said hedge funds are using large amounts of borrowed money, run into the billions of dollars, to pump up valuations in AI related stocks. The committee's report described a
