Connor Simmons
One million extra homeowners will face a jump in their mortgage bills because of the fallout from Donald Trump's war in Iran, the Bank of England has warned. The conflict pushed up borrowing costs across the economy, meaning five million households, not four million as estimated back in December, will see repayments rise over the next two years as they come off fixed rate deals.
The scale of the increase has caught officials off guard. Rates on a typical two year fixed mortgage climbed from 4.2 percent in December to 4.92 percent now, according to Bank figures, a move directly tied to the market turmoil that followed Trump's campaign against Iran. That single shift in the rate environment explains why the Bank has had to revise its household forecast upward by a million people in the space of a few months.
Why One Million Extra Households Are Suddenly Exposed
Most families rolling off a fixed rate over the coming two years will feel a fairly manageable pinch, with the Bank estimating an average monthly rise of around 45 pounds. But roughly 750,000 households who locked in ultra cheap deals before 2022, when rates sat below 3 percent, face a far rougher landing. Those borrowers must remortgage by December this year, and the Bank puts their average monthly increase at 170 pounds.
That gap between the mild hit facing most homeowners and the sharper shock awaiting those still on pre 2022 deals is the real story here. Anyone who fixed when rates were near historic lows is about to discover just how far the market has moved since, and the timing could hardly be worse for a government trying to convince voters that living costs are under control.
<
Pressure Builds on Andy Burnham Before He Even Takes Office
The warning lands just as Andy Burnham edges closer to Downing Street, inheriting a full list of economic headaches. Burnham has built much of his pitch to voters around cutting the cost of living, but a wave of mortgage increases hitting millions of households threatens to undercut that message almost immediately. Even though the Iran conflict itself appears to have wound down, mortgage rates have stayed elevated, leaving little room for a quick fix.
How the Rate Rise Breaks Down
| Household group | Number affected | Average monthly increase |
|---|---|---|
| All households remortgaging over next two years | 5 million | About 45 pounds |
| Pre 2022 fixed deals ending by December | 750,000 | About 170 pounds |
Hedge Funds Accused of Inflating an AI Driven Stock Bubble
Threadneedle Street's Financial Policy Committee, the body tasked with spotting the next financial crisis before it happens, says hedge funds are piling billions of dollars in borrowed money into AI stocks, and that this leverage is now a genuine risk. In its latest report, the Bank said rising equity prices have been driven partly by a narrow group of AI related companies that now dominate several global stock indices, and that hedge fund borrowing in equity markets has risen sharply as a result.
Part of the danger comes from how these funds operate. Hedge funds can pledge the same shares as collateral multiple times to fund further trades, which multiplies the damage if prices fall suddenly. The Bank also flagged that these same funds are borrowing heavily against gilts and other government bonds, raising the possibility that trouble in AI stocks could spill over into UK debt markets.
Sarah Breeden, the Bank's deputy governor for financial stability, said the funds active in AI trades are also deeply embedded in UK government bond markets, which are central to financial stability, and operate across many international markets too. She warned of the risk of contagion, either between bond markets in different countries or from equity and AI firms into UK gilts. The Bank pointed to the recent Middle East crisis as evidence this isn't theoretical: hedge funds unwinding positions during that period helped push gilt yields higher.
The report also found AI stocks are heavily concentrated geographically, accounting for more than half of total market capitalisation in the United States, South Korea and Taiwan. That concentration has made markets more volatile over the past year as AI shares have swung sharply in both directions.
AI Tools Raise the Odds of a Major Cyber Attack on Banks
Britain's financial system faces a much bigger threat from AI powered cyber attacks, the Bank also warned, pointing to a
Sarah Ross