‘Trumpflation’ could cost homeowners £3,000 more per year

Homeowners could be faced with paying over £3,000 extra per year on their mortgage following new analysis from INTEREST from Moneyfacts.

There have been ‘stress test’ scenarios published by the Bank of England to show what could happen to inflation and, in best, medium, and worst-case situations, if the conflict in the Middle East is prolonged.

The gentlest scenario (+£3,380 p/a), where mortgage rates would drop sooner, would see energy costs dropping, inflation peaking at 3.6% this year, and falling to under 3% in the third quarter of 2027.

The middle of the road scenario (+£1,950) is where energy prices drop more slowly, inflation increases to 3.7%, and stays higher for a longer period. Moneyfacts believes this to be the most likely outcome, with mortgage rates sticking to their current levels with some small increases.

The worst-case scenario (+£150) could see oil prices sticking above $120 and inflation increasing to 6.2%. In this situation, the base rate could creep up to 5.25%, resulting in the mortgage average rate pushing 6.75%.

The Bank of England's ‘Trumpflation’ stress scenarios show the huge impact the conflict in the Middle East could have on mortgage rates.

Our message remains the same: if your fixed-rate mortgage is ending within the next six months, securing a rate now will give you protection, as if rates rise, you would have already locked in, and if rates drop, you will be able to switch to a cheaper rate before completion.