According to the Bank of England, the war in the Middle East might lead to higher mortgage payments for approximately 1.3 million UK homeowners by the end of 2028. Borrowing costs are expected to increase due to the “shock” to the global economy, according to the Bank’s most recent assessment into economic risks. The number of households expecting to experience increases in mortgage expenses in the next 2.5 years has jumped from 3.9 million before the conflict to 5.2 million.
In contrast to rises in previous years, such as following the 2022 mini-budget, the report stated that these increases would “remain modest” in scale. Oil and gas prices, as well as the cost of government borrowing, have climbed significantly since the US-Israeli airstrikes on Iran started a month ago. According to the Bank’s Financial Policy Committee, the UK economic outlook has “deteriorated” because of this, which could impact GDP and lead to higher inflation.
Businesses and consumers in the UK would feel the pinch more acutely if the “sustained” increases in energy and mortgage prices were to continue. The banks and the financial system as a whole have been “resilient so far,” according to the Bank, since the markets have been able to absorb some “very large moves” since the conflict started.
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