Trumpflation could add up to £1,500 a year to homeloans: Moneyfacts – Mortgage Strategy

The ‘Trumpflation’ effect of the Middle East war could add £1,000 to £1,500 a year to the cost of a fixed rate, according to Moneyfacts.

The war between the US, Israel and Iran has caused a rise in swap rates, causing many lenders to hike mortgage rates and reprice their ranges.

Moneyfacts said the average two-year fix residential mortgage rate has risen from 4.83% at the start of March to 5.35% today, the highest since March 2025.

This has already added around an extra £900 per year to the cost of borrowing £250,000 over 25 years, Moneyfacts said.

Meanwhile Moneyfacts’ average five-year fix residential mortgage rate has risen from 4.95% at the start of March to 5.39% today, the highest since July 2024.

This has added around an extra £775 per year to the cost of borrowing £250,000 over 25 years.

If the conflict continues to disrupt the global economy, and the base rate hits 4-4.25% as markets are predicting, it may mean average rates on new mortgages stabilising at around 5.50% to 5.75%.

Given the volatility of events this is subject to change in either direction, Moneyfacts said.

This could add an extra £1,000 – £1,500 per year to the cost of borrowing £250,000 over 25 years compared to the overall Moneyfacts average mortgage rate (4.89%) at the beginning of March.

Two- and five-year swaps are now around 1 percentage point higher than at the start of the conflict and at their highest level in more than a year, to now sit around 4-4.25%.

These rates underpin mortgage pricing and reflect market expectations for central bank rates.

Moneyfacts head of consumer finance Adam French said: “Swap rates, which underpin mortgage pricing, have risen sharply following the decision to hold the base rate at 3.75%, with markets interpreting commentary from the Bank of England as leaving the door open to rate rises amid ‘Trumpflation’ fears.

“With two- and five-year swaps now sitting at their highest level in more than a year, lenders are once again facing higher funding costs, and this will feed through into mortgage pricing.

“Moneyfacts analysis of more than 30 years of historic rates data shows mortgage rates have historically averaged around 1.5 percentage points above base rate. If markets continue to price in one or two rate rises, this could see average new mortgage rates stabilise at around 5.50% to 5.75%. That would leave borrowers paying £1,000 to £1,500 more per year on a typical £250,000 mortgage compared to just a few weeks ago.”