Iran War Looms Over Global Economy as Mortgage Rates Take Hit

The UK’s largest mortgage lender has warned that a potential conflict with Iran could send shockwaves through the global economy, leading to higher borrowing costs for millions of homeowners. A flare-up in tensions between Iran and Western countries over nuclear ambitions could lead to disruptions in energy supplies, causing prices to skyrocket. This, in turn, would push up mortgage rates as lenders seek to protect their portfolios from potential losses. The Bank’s warning comes as household debt stands at £1.7 trillion, with 13% of that being mortgages. If interest rates were to rise sharply, it could put a huge strain on households who are already struggling to make ends meet. Experts say that the impact on mortgage rates would be most severe for those who have variable-rate mortgages or are approaching the end of fixed-rate deals. For these individuals, a rise in interest rates could push their monthly payments up by thousands of pounds. The warning from the Bank comes as the UK government prepares to announce its response to growing tensions with Iran. Prime Minister Rishi Sunak has said that any military action would be a “last resort”, but has also warned that the country would not stand idly by if it felt its national security was under threat. Meanwhile, mortgage lender Nationwide Building Society has predicted that interest rates will rise sharply over the coming year, with some experts forecasting rates could reach 6% or higher. The bank’s chief economist, Robert Gardner, said: “A conflict in Iran would be a major source of uncertainty for businesses and households. We can expect to see increased volatility in financial markets and rising borrowing costs as a result.” The Bank’s warning is a stark reminder of the potential risks facing the UK economy if tensions with Iran escalate further. As the country prepares for what could be a long and drawn-out conflict, householders are left wondering how they will cope if mortgage rates rise sharply.