By Lawrence White LONDON, March 24 (Reuters) - The Iran conflict is causing price turmoil in Britain's mortgage market not seen since the disruption of the pandemic and the country's 2022 mini-budget
Iran War Triggers UK Mortgage Market Turmoil Not Seen Since the Pandemic
Impact of Iran Conflict on UK Mortgage and Financial Markets
By Lawrence White
Unprecedented Mortgage Rate Volatility
LONDON, March 24 (Reuters) - The Iran conflict is causing price turmoil in Britain's mortgage market not seen since the disruption of the pandemic and the country's 2022 mini-budget crisis, data from Moneyfacts shows, underlining how the war is playing havoc with financial markets worldwide.
Sharp Rise in Borrowing Costs
Since the U.S. and Israel first struck Iran on February 28, Britain's borrowing costs have risen a stark 90 basis points (bps), to highs last seen in November 2023 when yields surged as the Bank of England hiked rates to combat inflation.
Comparison to Previous Crises
In the 24 days since the conflict began, the average two-year fixed rate mortgage has risen from 4.83% to 5.51% on March 24, the data from Moneyfacts showed, while five-year mortgages have risen 57 bps to 5.52%.
That compares with a 28bps fall in two-year pricing during the COVID era as the Bank of England slashed rates to help the economy, and a much sharper 180 bps increase during the 2022 mini-budget fiasco, as international bond investors savaged the British government's plan to cut taxes through more borrowing.
Bank and Lender Responses
Mortgage Product Withdrawals
The current disruption reflects the fact that British banks do not wait for interest rates to rise before repricing home loans but instead respond to expected hikes by cutting products from the market, often overnight, brokers said.
Since the war in Iran began, a net 21% (1,780) of available residential mortgage products on the market have been withdrawn, Moneyfacts said. While that has not yet reached the 45% of products withdrawn seen during the COVID and mini-budget crises, brokers said banks will continue to reprice amid concern that the Bank of England's policy may now need to stay tighter for longer.
(Reporting by Lawrence White, additional reporting by Alun John; Editing by Hugh Lawson)
