Households in South Devon could face mortgage increases of more than £2,000 a year following rising interest rates linked to global economic uncertainty after the escalation of conflict between the United States and Iran.

Analysis by South Devon MP Caroline Voaden suggests that homeowners taking out a typical two-year fixed mortgage in the South Hams could pay around £2,105 more per year than before the conflict began on February 28, 2026.

The Liberal Democrats say the increase reflects broader inflationary pressures triggered by the conflict, although economists caution that mortgage rates are influenced by multiple factors, including the Bank of England's policy and broader market expectations.

Figures from MoneyFacts show the average interest rate for a two-year fixed deal rose from 4.84% at the end of February to 5.87% in April.

For a five-year deal, the average rate has risen from 4.95% to 5.76% over the same period.

In April, the Bank of England warned that the Iran-US war had created a “negative supply shock” to the global economy, pushing up energy prices and inflation while weakening growth.

Policymakers say this can lead to higher borrowing costs, as interest rates are used to bring inflation under control, with the effects feeding through to mortgage repayments.

Ms Voaden argued families were already struggling with rising living costs. She described what her party calls “Trumpflation” as a growing burden on households, adding that “whether it’s fuel costs or spiralling mortgage rates, hardworking families are being squeezed from all sides”.

The MP also warned that renters could face higher costs if landlords pass on increased mortgage payments.

Property analyst Aneisha Beveridge recently indicated that rent rises could follow patterns seen during previous spikes in interest rates, including after the outbreak of war in Ukraine in 2022.

In response, the Liberal Democrats are calling for an emergency package to reduce costs, including a proposal to cut fuel duty by 12p per litre and lower public transport fares.

The government says support is already in place through its Mortgage Charter, which offers borrowers temporary flexibility such as switching to interest-only payments or extending loan terms to reduce monthly costs.

The Treasury’s Mortgage Charter Policy Paper in March said: “While the UK’s mortgage market remains resilient, open and competitive across all major product types and segments, some households may face higher monthly payments as they come to the end of a fixed-rate deal and move onto a new rate.

“Importantly, where a borrower can afford their mortgage repayments, they should continue to make them in full and on time. This will help keep the overall cost of borrowing down.

“However, there are significant protections in place for those worried about their mortgage payments.”

The Mortgage Charter is a scheme intended to provide a safety net for households facing higher costs, rather than directly limiting interest rate rises.

Experts emphasise that while mortgage rates have risen in recent months, individual costs will vary depending on property values, deposits and lender terms.

The Liberal Democrat analysis is based on an 80% loan-to-value mortgage over a 25-year term, using data from the Office for National Statistics.