Homeowners are facing a potential bill shock of more than £280 a month if a worst-case inflation scenario materialises, new analysis warns.
UK households face having to find extra £280 for their mortgage each month
UK households could face having to find an extra £280 every month. UK homeowners are facing a potential bill shock of more than £280 a month if a worst-case inflation scenario materialises, new analysis warns.
Research by Moneyfacts suggests a so-called “Trumpflation” surge – linked to global turmoil and an escalation in the Iran conflict – could drive borrowing costs sharply higher, leaving households thousands of pounds worse off.
Under the bleakest outlook modelled alongside scenarios from the Bank of England, a typical borrower with a £250,000 mortgage over 25 years could see annual repayments jump by £3,380 – equivalent to about £281 extra every month.
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That would take yearly costs to £20,724, compared with £17,346 before the recent geopolitical tensions flared.
The warning comes as experts say mortgage rates tend to sit around 1.5 to 1.75 percentage points above the Bank’s base rate – meaning any spike in inflation feeds quickly into higher borrowing costs.
A more benign outcome would see energy prices fall back quickly, with inflation peaking at 3.6% before dropping below 3% next year.
Mortgage rates could settle between 5% and 5.5%, limiting the pain to as little as £150 a year – though still higher than before the conflict.
The central case, currently seen as most likely by markets, assumes inflation sticks around longer at about 3.7%. Mortgage rates would hover between 5.5% and 6%, leaving borrowers paying £1,050 to £1,950 more annually.
But the worst-case scenario paints a far more alarming picture. If oil prices remain above $120 a barrel, inflation could surge to 6.2% and force base rates up to around 5.25%.
That would push typical mortgage rates towards 6.75% – triggering the £3,000-plus annual hit.
Adam French, head of consumer finance at Moneyfacts, said the gap between best and worst outcomes is “brutal” for households.
He warned: “The Bank of England’s ‘Trumpflation’ stress scenarios lay bare just how damaging the economic repercussion of the Iran conflict could become.”
Mr French said: “That would translate into an increase of more than £3,000 a year for many borrowers – a devastating hit to affordability.”
