Middle East Conflict Could Add £3,380 to UK Mortgage Costs, Analysis Warns

New analysis from Moneyfacts warns that a prolonged Middle East conflict could push average UK mortgage rates to 6.75% in a worst-case scenario, adding £3,380 annually to repayments on a £250,000 25-year mortgage. The Brent crude oil price has surged from $72 to $110 per barrel since late February 2026 due to the conflict, and the Bank of England's stress tests project inflation could peak at 6.2% with the base rate rising to 5.25% if oil remains above $120. While the Bank of England held its base rate at 3.75% on May 6, 2026, and some lenders like Halifax and First Direct have recently cut rates, brokers warn those reductions may be short-lived as swap rates—a key indicator of lender funding costs—rose by 13.6 basis points to 4.313% on Tuesday. Traders now expect no interest rate cuts in 2026, and around 53% of UK mortgage holders are expected to see their payments rise, with the Bank forecasting average monthly increases of approximately £80 over the next three years. The conflict has also driven food inflation, with prices projected to surge 50% by November and beef prices climbing 64%, disproportionately affecting the poorest households.