Mortgage repayments are expected to shoot up by £3,000 this year for hundreds of thousands of households as a result of the US-Iran war, new analysis shows.
Families coming towards the end of their five-year fixed rate deal are walking into much higher mortgage rates compared to the loans offered in 2021.
Analysis conducted by estate agency Hamptons has found that homeowners risk paying £250 more a month due to the conflict in the Middle East.
This comes to an additional £3,000 a year for these households once they secure a new new rate with their lender.
Mortgage repayments will soar by up tp £3,000 for thousands of families
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Since the Covid-19 pandemic, interest rates have soared due to the Bank of England's Monetary Policy Committee (MPC) decision to hike the cost of borrowing.
In 2021, the central bank's base rate sat between 0.1 per cent and 0.25 per cent; a far cry from the 5.25 per cent it ended up being during the height of the cost of living crisis.
While interest rates have fallen to 3.75 per cent, the US-Iran war is expected to cause an inflationary spike due to the surge in oil prices.
Based on Moneyfactscompare's own figures, the average two-year fixed mortgage is now at 5.68 per cent due to the ongoing conflict.
Analysis shows mortgage repayments now swallow nearly half of average earnings | INTEREST BY MONEYFACTSLATEST DEVELOPMENTS
Homebuyers are struggling the UK market | NATIONWIDE BUILDING SOCIETY In comparison, the average interest rate attached to this product was 3.97 per cent in February, weeks prior to the US and Israel taking military action against the Islamic Republic
On top of this, Moneyfacts reports that the average five-year fix has an interest rate of 5.63 per cent, while the average two-year tracker rate is at 4.48 per cent.
UK Finance figures suggest that around 1.8 million households will reach the end of their fixed-rate mortgage deal in 2026.
Out of this group, 504,000 homeowners will come to the end of their five-year fix and pay significantly more towards their mortgage repayments
Bank of England interest rate cuts predicted to slow | GETTYAneisha Beveridge, the head of research at Hamptons, broke down what the US-Iran means for the finances of families across the UK.
She said: "These households secured their deals when rates were pretty much at record lows, and many have had time to prepare for higher repayments.
"That said, the pace of rate rises, particularly in recent months, will still catch some off guard."
Despite these projections, major lenders including Barclays and NatWest have unveiled mortgage rate cuts in a win for prospective homebuyers.