Mortgage holders issued new £7,000 warning

Mortgage rates have risen significantly since the start of the war in Iran, leaving homeowners facing steep increases in monthly payments, according to a financial expert. Data provided by Moneyfacts show that the lowest available 2-year fixed deal before the start of the conflict in the Middle East was 3.51%, whereas it has now jumped to 4.6%.

That equates to an increase of £151 a month, or £1,812 a year. However those figures are believed to relate to the lowest possible rates, with average rates now around 5%. The ongoing conflict is expected to lead to many lenders announcing increases this week to more than 6%, leaving homeowners as much as £4,300 worse off annually.

Caitlyn Eastell, Personal Finance Expert at Moneyfactscompare.co.uk, explained: "Since the beginning of the conflict, almost £1,800 a year has been added onto the average two-year fixed rate - that's over £3,500 for the full term based on the typical £250,000 loan over 25 years. For the average five-year over £1,400 a year has been added, which is over £7,000 for the full five years.

"However, some of the withdrawals seen in the first few weeks of the conflict are slowly starting to trickle back but lenders may still be cautious as the future around inflation and interest rates is uncertain."

Jinesh Vohra, CEO of Sprive, urges homeowners to review their existing deal if it's coming up for renewal and consider overpaying where possible to mitigate the impact of rising borrowing costs.

He told the Daily Express: "The jump in rates in just a few weeks shows how quickly global events can ripple through the mortgage market and expose homeowners to higher costs.

"With rates going past 5% last week and now many creeping over 6%, the impact is immediate for those looking to buy, remortgage, or sell.

"When markets react like this, lenders often pull back or tighten criteria, leaving borrowers with fewer options almost overnight.

"Homeowners need to act proactively: review their deals early, lock in fixed rates where possible, and overpay if they can to reduce interest costs.

"In a market like this, homeowners who stay proactive are the ones who benefit most."