Mortgage shock for millions as repayments could rise by £100 per month amid US-Iran war 'volatility'

Lenders are now anticipated to push borrowing costs higher in the coming weeks, undoing recent improvements that had brought some deals below 3.5 per cent just a month ago.

The escalating conflict in the Middle East has compounded market uncertainty, as rising energy costs threaten to drive inflation upward and place additional strain on mortgage pricing.

Nicholas Mendes, mortgage technical manager at John Charcol, noted that while the Monetary Policy Committee (MPC) voted unanimously to hold rates, the tone of the minutes struck a firmer note than many anticipated.

He highlighted that the decision was taken before the latest overnight strikes on Iranian and Qatari gas infrastructure, meaning markets are now responding to a far more severe geopolitical situation than policymakers had fully weighed.

Mr Mendes explained: "Gilt yields moved sharply higher after the Bank's statement, particularly at the shorter end, and that matters because it feeds directly into how lenders price fixed-rate mortgages."

Sam Kirtikar, chief executive of The Mortgage Broker Group, described a marked increase in clients seeking to review their options ahead of schedule rather than adopting a wait-and-see approach.

He said: "The mortgage rate volatility represents the volatility that everyone felt around the world, with there suddenly being a lot of uncertainty in the mortgage market, and that has absolutely made our clients much more cautious about leaving things too late and waiting."

Mr Kirtikar reported numerous rate switches in recent weeks, with borrowers eager to secure terms now amid fears that lenders may reprice or withdraw products at short notice.

He emphasised that even with the Bank holding steady, mortgage pricing would not automatically fall, as lenders continue responding to broader market conditions and funding costs.

Households could be hit with three interest rate increases this year as the economic consequences of the Middle East conflict take hold.

For families with a £250,000 mortgage, three quarter-point base rate rises would translate to approximately £100 extra each month in repayments.

Governor Andrew Bailey acknowledged that rate cuts were "not on the horizon" and said he was "ready to act as necessary" to contain inflation.

The Bank now expects inflation to climb to 3.5 per cent this month, abandoning earlier hopes of reaching its two per cent target this spring as energy prices surge.