Homeowners could be hit with an extra £3,000 a year on their mortgage payments as so-called Trumpflation takes hold, according to new analysis. The Bank of England has modeled scenarios where conflict involving America and Iran keeps oil prices above $120 per barrel, pushing UK inflation as high as 6.2 per cent.
Base Rate Could Rise to 5.25%
The Bank's base rate could climb to 5.25 per cent, with average mortgage rates rising to around 6.75 per cent. Research from Moneyfacts indicates this would add roughly £280 a month to repayments for homeowners with a typical £250,000 mortgage, equating to approximately £3,360 a year.
Impact on Monthly Payments
The analysis found mortgage rates usually sit between 1.5 and 1.75 percentage points above the Bank of England's base rate. For a typical £250,000 mortgage spread over 25 years, monthly repayments would jump from around £1,445 before the conflict began to approximately £1,727 under the worst-case scenario. That represents an annual mortgage bill of £20,724, compared with £17,346 at pre-war levels – a difference of £3,380 per year.
Adam French, head of consumer finance at Moneyfacts, said: "That would translate into an increase of more than £3,000 a year for many borrowers – a devastating hit to affordability."
Advice for Borrowers
Mr French advised: "Most lenders allow you to secure a new deal up to six months before your current fixed rate expires, effectively giving you the option to 'lock in' today's rates as insurance." James Tatch, head of analytics at UK Finance, noted that the past few years have been challenging for those trying to buy a property, with affordability pressures weighing heavy. "But the pain is not felt equally across the country," he added. "Property prices, wages and demographics vary greatly across and within regions. All of these have an impact on affordability."
