London homeowners face £2,600 rise in mortgage bills as Donald Trump's Iran war blights economy

Homeowners in London have been warned that they may face hefty rises in their mortgage bills if Donald Trump’s Iran war continues into next year.Fixed mortgage rates have been rising in recent weeksPA WireIf this happens, Londoners would be particularly exposed to rising mortgage bills as many of them have had to take out big home loans to buy a property.Caitlyn Eastell, personal finance analyst at Moneyfactscompare.co.uk, told The Standard: “When mortgage balances are larger, even a relatively modest rate increase can add a significant amount to monthly repayments. “On a two-year fixed rate, borrowers could expect an average of 5.83%, which would lead to monthly repayments of around £2,218 on a typical £350,000 loan over 25 years. “However, money markets are pricing in several rate hikes, to around 4.75%, which would add around £217 extra each month (£2,604 a year) if they locked in at a significantly higher 6.83%. “For households that may already feel stretched by higher living costs, that is far from insignificant.”She added that homeowners with a mortgage of £250,000 with a term of 25 years could see a rise of £155 in their monthly bill, if there are four interest rate rises of 0.25 percentage points, and of £279 a month for a home loan of £450,000.Donald Trump’s Iran war has triggered major economic disruption PA WireBank of England governor Andrew Bailey has previously guided when he believed the markets have got it wrong in their expectations of interest rate movements.In London, the Bank of England’s MPC voted 6-3 to maintain bank rate at 3.75%, repeating July’s split.But the unchanged vote concealed a shift within the majority.Five of the six members who supported a hold explicitly outlined circumstances that could lead them to vote for interest rate rises, as the prolonged Middle East conflict pushes energy prices and the near-term inflation outlook higher.Read MoreBank of England governor Andrew Bailey says the economic situation with Donald Trump’s Iran war is ‘too unpredictable’PA WireExperts pointed to rises in fixed mortgage rates in recent weeks and a “price sensitive” housing market where buyers are being mindful of their costs.The average five-year fixed-rate homeowner mortgage on the market was at its highest level since November 2023 on Thursday, according to financial information website Moneyfacts.It said the average five-year fixed homeowner mortgage rate on Thursday was 5.87%, jumping from 5.81% on Wednesday.Several lenders have hiked fixed mortgage rates in recent weeks amid rises in swap rates, which are used to price mortgages.Petrol and diesel prices have been risingPASusannah Streeter, chief investment strategist at Wealth Club, said: “Fixed mortgage rates are guided by swap rates, which reflect expectations for where interest rates are heading, rather than simply where (the Bank of England base rate) stands today.“With markets still pricing in further rate hikes, swap rates have been pushed higher, and lenders have already been raising some fixed mortgage rates.”JPMorgan analyst Allan Monks said the Bank of England is “gearing” up to hike and sees rate increases in November and next February.