Warning Iran war 'shock' could push up mortgages for 1.3m homeowners

About 1.3 million UK homeowners may face higher mortgage payments by the end of 2028 as a result of the war in the Middle East, the Bank of England has said.

The Bank's latest report into the risks facing the economy found borrowing costs were likely to rise as the result of the "shock" to the global economy.

A total of 5.2 million households now face increases in mortgage costs in two and a half years' time, compared to the 3.9 million expected when forecasts were made before the conflict.

However, the report said the scale of those increases would "remain modest" compared with those in recent years, such as after the mini-budget in 2022.

Since the US-Israel attacks on Iran began a month ago, oil and gas prices have increased sharply and the cost of government borrowing has risen.

The Bank's Financial Policy Committee warns this could affect growth and may push up inflation, saying that the UK economic outlook had "deteriorated" as a result.

It also said this would increase pressure on UK households and businesses, particularly if higher energy and mortgage costs were "sustained".

However, the Bank said the financial system, including the banks, had been "resilient so far" with the markets absorbing some "very large moves" since the conflict began.

The committee said it believed the UK banking system would be able to support households and businesses "even if economic and financial conditions were to be substantially worse than expected".