The variety of mortgage products available to UK consumers has collapsed in the wake of the Iran war, with nearly 700 deals vanishing from the market in a fortnight. This contraction has been accompanied by a sharp rise in interest rates, adding an average of £800 to the annual cost of a home loan. Financial experts are warning that the “Trumpflation” wave is just beginning to hit the housing sector.
According to Moneyfacts data, the average two-year fixed rate has surged to 5.28%, while the five-year average has reached 5.32%. For a typical £250,000 mortgage, this represents an annual increase of £788 and £651, respectively. This “repricing” is the largest upheaval for the industry since the 2022 fiscal crisis under Liz Truss.
The availability of cheap credit has all but disappeared. Only nine mortgage deals with interest rates below 4% are currently on the market, down from 490 just seven days ago. This suggests a massive retreat by lenders who are concerned about the rising cost of wholesale funding. As energy prices rise due to the conflict, so do the costs of providing long-term fixed-rate loans.
The Bank of England was poised to offer relief to homeowners this month, but those plans are now on ice. The central bank is expected to hold interest rates at 3.75% this Thursday as it monitors the “Trumpflation” impact on UK prices. The prospect of rate cuts, which had boosted market confidence earlier in 2026, has been replaced by fears of a new inflation spike.
Homeowners and buyers are being warned to prepare for a “bumpy ride.” With 1.8 million fixed-rate deals ending this year, the demand for new mortgages will be high, but the supply of affordable deals is shrinking. The “Trumpflation” effect has fundamentally altered the trajectory of the UK mortgage market in a remarkably short period.