Mortgage costs in Britain have moved up sharply since the Iran war began at the end of February, and for some buyers the rise has already killed a deal. Panos and his wife pulled out of buying their first home in Hanwell, west London, after the monthly repayment they had been quoted rose from £2,600 to £3,100.
That shift matters now because the borrowing assumptions many people were making only weeks ago have been blown apart. A five-year fixed rate that was 4.18% at the beginning of February had risen to 5.22% by 13 April, and the Bank of England is now expected to raise rates at least once this year after hopes of cuts in 2026 were quickly extinguished when the war started.
Panos said he asked the broker to explain the change in plain English and was told his payments would rise from £2,600 a month to £3,100. “We could not afford this – it would mean all my wages would go into paying for the house, and we would have to rely on my wife’s wage, which is not very high. It couldn’t be done. We were heartbroken as we had to pull out,” he said. The would-be buyer, who has rented for more than 10 years, said he had been looking forward to becoming a homeowner in 2026, but now has to wait.
Britain’s largest housebuilder said Thursday was the most challenging time to be a first-time buyer since the 2008 financial crisis, and Panos’ experience helps explain why. Some buyers had been expecting interest rates to go down, not up, and the rise in mortgage costs has been enough to close the door on purchases that looked affordable at the start of the spring.
The squeeze is not limited to buyers on the edge of the market. Edward and his family sold their house last October and planned to rent for six months while they looked for a new place to buy, but halfway through the tenancy they were served a section 21 eviction notice. Edward said the rental market started to dry up, and when they found another place in mid-April it was both smaller and more expensive than the first one. “We were betting on interest rates going down, which seemed an almost certainty at that time,” he said. “Then, when things couldn’t get any worse, the war happened, and mortgage rates just skyrocketed day by day.”
The pressure has left many Britons trapped between higher borrowing costs and a tighter housing market, with some forced to keep renting, settle for less space or cut back on what they can afford. Edward said the properties he and his family could still view were attracting rushes from other buyers, so even a week’s delay could turn an affordable home into one that was out of reach. Mortgage costs are expected to stay higher for longer, and the next question is not whether the market has changed, but how long buyers, movers and families can keep absorbing it.
