(The Daily Telegraph, Szu Ping Chan, April 2, 2026)
The Bank of England has issued a clear warning: the war in Iran risks triggering a financial crisis in the United Kingdom, leaving families to face higher borrowing costs, sharply rising prices, and weaker economic growth.
Monetary policy officials have already noted that one million more people will have to cope with higher mortgage payments following the rate hikes decided by banks. By 2028, 5.2 million borrowers – that is more than half of all homeowners with a mortgage – will be paying higher installments, compared to 3.9 million before the conflict.
Governor Andrew Bailey, however, urged caution, emphasizing that investors are “running too fast” in their expectations of interest rate increases. The Bank’s Financial Stability Committee warned that the shock of the conflict will weigh on growth, fuel inflation, and tighten financial conditions, with a real risk of a credit crunch if multiple vulnerabilities materialize simultaneously.
Bank of England Warning
“Britain risks a financial crisis that would leave families struggling with higher borrowing costs and skyrocketing prices as a consequence of the war in Iran, the Bank of England warned.”
Impact on Mortgages
“Monetary policy officials said the conflict has already left one million more people facing higher mortgage payments after banks raised their rates. Around 5.2 million borrowers, that is more than half of all homeowners with a mortgage, will now have to pay more by 2028, the Bank said. This is an increase from 3.9 million before the start of the conflict.”
Effects of the Shock on the Economy
“The shock will weigh on growth, increase inflation, and tighten financial conditions. […] The conflict has worsened sovereign debt outlooks through its potential to weigh on growth, push up interest rates, and increase spending pressures. This could limit governments’ ability to respond to future shocks and exacerbate vulnerabilities in sovereign debt markets.”
Risk of Systemic Crisis
“Negative impacts on the global economy increase the likelihood that multiple vulnerabilities will materialize simultaneously, amplifying their effect on financial stability and, ultimately, on the provision of essential financial services to British households and businesses.”
Pressure on Public Finances
“The United Kingdom is expected to spend more than £100 billion this year alone on debt interest, reducing resources available for essential public services such as the National Health Service.”
(Excerpt from the newsletter by Giuseppe Liturri)
