British families are the latest casualties of the Middle East conflict as the “Trumpflation” effect adds nearly £800 to the average annual mortgage bill. The sudden spike in rates has ended hopes for a spring rate cut from the Bank of England. Lenders have reacted to the geopolitical instability by withdrawing 700 products and hiking rates on the remaining deals to their highest levels since early 2025.
The surge is driven by a spike in “swap rates,” which are influenced by expectations for future inflation. With the war in Iran threatening global energy supplies, markets are pricing in higher prices for longer. This has moved the average two-year fixed rate from 4.83% to 5.28% in just 14 days, creating an immediate financial burden for anyone looking to secure a new deal.
For a borrower with a £250,000 mortgage, the monthly increase is roughly £65. Over the course of a two-year fix, this adds nearly £1,600 to the total cost of the loan. This “war tax” on housing comes at a time when 1.8 million households are already preparing for the end of their current fixed-rate periods, many of which were secured when rates were much lower.
The collapse of low-rate options has been swift. Only nine fixed-rate deals below 4% are currently available, compared to nearly 500 just a week ago. This total withdrawal of competitive pricing suggests that lenders are bracing for a period of extreme economic uncertainty.
All eyes are now on the Bank of England’s meeting this Thursday. While markets were previously betting on a rate cut to 3.5%, the consensus has shifted to a hold at 3.75%. If inflation data continues to worsen, some experts even suggest that rates could move upward before the end of 2026, further squeezing the UK’s “squeezed middle” homeowners.