How the Iran-US conflict is impacting the UK housing market

The recent US-Iran conflict is having far-reaching consequences beyond the areas impacted by missile attacks. The latest is its effect on UK manufacturing, with the sharpest rise in cost inflation since Black Wednesday more than 30 years ago disrupting everything from on-the-ground services to travel and supply chains. It’s not just the business world that is feeling the strain however…

How British life is being impacted by the Iran war

You’re certain to have noticed one, rather dramatic change when filling up your vehicle. Prices at the fuel pumps have risen steeply in recent weeks. With projected energy prices also expected to follow suit due to surging oil and gas costs, the future isn’t looking particularly bright.

While many experts agree that it’s too early to say exactly how much energy prices will soar by in response, Chris O’Shea, boss of British Gas-owner Centrica, shared his thoughts on the matter with BBC News:

“Around 20% of the world’s oil usually flows through the Strait of Hormuz, but Iran targeting shipping through the vital waterway has effectively brought it to a complete halt. But O’Shea said only 3-4% of the global gas supply had been lost due to the closure of the strait. ‘So, the impact on gas, and therefore on electricity bills, should be lower than the impact on oil,’ he told the BBC’s Sunday with Laura Kuenssberg programme.”

Everyday spending is changing too

With many households braced for higher energy prices and other inflated costs, and even food price hikes also expected, everyday spending is changing too.

Consumer confidence has dropped, with many people choosing to delay major purchases as a result. According to this research, 34% more people are deferring major purchases than three months ago, cutting spending to preserve funds and potentially prepare for the worse.

Mortgage market impacts and interest rates

Despite the Bank of England (BoE) holding its interest rate at 3.75% at last review, growing concerns mean inflation will rise regardless, and this is already impacting the mortgage market.

Mortgage rates have risen above 5% across a wide range of products. Lenders are actively pausing plans to cut rates and many more deals are being pulled in response to the turbulence caused by the Iran war. These market changes are affecting home movers, those looking to remortgage and people stepping onto the property ladder for the very first time.

How will mortgage rate rises affect YOU

With higher mortgage rates, lenders will need to check that you can afford increased monthly repayments, putting you at greater risk of mortgage application rejection. There’s also expected to be lower buying confidence due to uncertainty and job fears, which will result in falling demand and slower house price growth, or even declines.

First time buyers will feel the impact the most as higher mortgage rates and tougher affordability tests take their toll. With fewer buyers on the market, those ready to move and purchase their first home will have less competition and greater negotiating power, which is only a good thing! Existing homeowners may be shielded for now thanks to fixed rate deals, but tracker and variable mortgage customers will see payment changes almost immediately. Fixing now however might not be the answer.

We recommend seeking mortgage advice for your specific circumstances to explore all your options. Please contact our team today to discuss your requirements.