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I don’t know about you, but I am currently losing money. I am lucky enough to have been able to invest some of my savings, but since Iran, I find it too painful to open the app that tells me what’s happening to the cash I’ve stashed away. Almost as painful as the tracker in my Monzo app, which tells me how much my flat is worth month to month. Why? Because, put simply, those values are going in one direction, and that is down.
There is no way to sugarcoat how serious the economic fallout of Donald Trump’s decision to strike Iran just over a month ago is. Trump took aim at Britain directly as he criticised countries suffering from soaring oil prices due to the closure of the Strait of Hormuz, saying the UK should “go get your own oil”.
But panicking won’t help. In this week’s newsletter, let’s look at what’s actually happening and what you can do instead of worrying.
Coming up in this week’s newsletter:
What does the Iran war mean for Britain’s economy, and how does it affect you – from the cost of living, to mortgages, savings and investments? Why the risks are very real, but, arguably, Britain’s economy is better placed to deal with them than in 2022, when inflation soared following Vladimir Putin’s decision to start an illegal war with Ukraine. I’ll explain why. And, finally, my mini-report from inside last week’s leasehold All-Party Parliamentary Group (APPG) with Housing minister Matthew Pennycook at the House of CommonsFirstly, let’s talk about the economic damage done by Trump’s decision to strike Iran, triggering a war in the Middle East and a stand-off in one of the world’s most important shipping lanes, the Strait of Hormuz.
Energy bills
It is expected that there will be an inflation rise later this year as a result of the conflict because of the impact it has had on oil and natural gas (LNG) supplies. As I wrote last week, this is why the Bank of England decided to hold interest rates at 3.75 per cent.
It is thought that energy bills could rise by £332 in July and hit an average of £2,000 a year, when this economic shock feeds through into the price you pay to cook, heat and light your home.
That is news that nobody wants to read. However, it’s worth noting that because this conflict has happened in early spring, the timing isn’t as bad as it could be, and there is a chance that things will calm down before winter, when people rely on their heating more.
Equally, it’s worth knowing that the Chancellor Rachel Reeves is looking at finding ways to support people who struggle with their bills.
Under one plan, extra cash could be injected into the crisis and resilience fund (CRF), a £1bn a year council-run scheme in England. However, so far, Britain’s Labour government have ruled out any universal support of the sort brought in by former Conservative prime minister Liz Truss in 2022.
If you can afford it, now is a very good time to think about making your home more energy efficient. That could look like adding more insulation, new windows or even getting some thick curtains to help keep you warm in the winter. This is something I’ve been looking at since 2022. I live in a block of flats and we’ve installed solar panels on the roof. That said, we’ve been having some trouble securing a discount on our communal energy bills, which, we were told, we’d be entitled to in return. The Government has some really good advice about what you can do here.
More broadly, you’re going to hear a lot of debate about whether we should be drilling for oil in the North Sea or, even, fracking for gas in the coming weeks. Energy Secretary Ed Miliband’s position is that we should not and instead maintain that a transition to “clean power” and away from fossil fuels is the only way for Britain to achieve true energy security.
Mortgage costs
As I have reported with my colleague Callum Mason over on The i Paper’s money desk, mortgage rates are now at the mercy of Trump.
If you are currently trying to secure a mortgage or remortgage, that is a nightmare. And, if your fixed-rate is coming up for renewal in the next six months, it’s really worth getting in touch with a reputable mortgage broker as quickly as possible to work out what your options are.
It’s thought that as many as 1.8 million homeowners are coming off of fixed-rate mortgage deals in 2026.
This is very unpleasant if you’re one of them. However, it’s worth noting that the housing market is in a slightly better place than it was in 2022 when the Ukraine inflation/Truss “mini-budget” mortgage rates crisis struck.
Why is that? Firstly, it is because house prices have not been rising as high or as fast in recent years as they were in 2020 or 2021. And, secondly, even though a rise in average fixed rates from 4.83 per cent at the start of March to 5.84 per cent is very significant, because of the rate hikes we saw in 2022, several mortgage brokers have told me that they feel more “prepared” to counsel their clients through this turbulence.
If Britain’s housing market slows down because of the Iran war and fewer people are buying and selling homes, that will impact economic growth and, more importantly, people’s lives but, ultimately, what we learned in 2022 is that the housing market is more resilient than some commentators feared and it’s unlikely (though never impossible) that there will be a major house price crash like we saw after the 2008 global financial crisis.
The price of renting
Sadly, for the millions of people who rent their homes privately in England and Wales (in Scotland, there is national rent control, which is why I don’t include Scottish renters), if mortgage rates go up, rents could go up.
At present, average rent inflation is at 3.5 per cent across the country. This means that private rents are still rising faster than the price of other consumer goods.
The National Residential Landlords Association (NRLA) are warning that landlords are seeing the cost of their buy-to-let mortgages go up by as much as £1,100 a year because of the Iran War. The NRLA is warning that most landlords simply cannot absorb growing costs without passing them on through higher rents.
However, if you’re a private renter, it’s worth knowing that the Government’s Renters’ Rights Act will come into force on May 1st. This will give you new powers to challenge rent increases, which you can read all about here.
Once again, none of this is good. But, because of the new legislation, private renters have more rights and more secure tenancies than they did in 2022.
Cost of living
If inflation rises, you’d hope your wages will follow. However, because the Chancellor froze taxes and student loan repayment thresholds until 2031 in her Budget at the end of last year, any wage increase you get will be taxed more.
This is annoying. Particularly for younger adults with Plan 2 student loans.
For now, there isn’t much you can do about this but knowledge is power. So, don’t be caught out by your payslip.
Savings and investments
Finally, back to my horrifying encounter with my investment account. If, like me, you’re lucky enough to have some savings that you’ve invested, remember this: investing is a long-term game. Not a short-term one. Fluctuations are, sadly, a feature of the global economy. However, there are things you can do, and certain investments are more exposed to the Iran War than others. So, if in doubt, speak to a reputable and regulated financial advisor to find out your options.
This will be little comfort to mortgage holders. But, do remember that if interest rates go up, so does the interest you earn on your savings!
Housing crisis watch
Last week, I attended the APPG for leasehold reform. We heard from Housing and Planning minister Matthew Pennycook directly about the Labour government’s plans to reform this really pernicious system of homeownership.
At the meeting, Pennycook confirmed that the Government will now allow new legal challenges from freeholders to delay reforms. That’s the first time I’ve heard him say that. He also confirmed that there will be new legislation to firm up existing protections for leaseholders as introduced by the Tories shortly before they left government in 2024.
Are you a leaseholder with a story? I’d love to hear from you: vicky.spratt@theipaper.com
What I’m reading and watching
I went to see the Turner and Constable exhibition at the Tate Britain over the weekend. I am afraid, with respect to Constable, that I am a die-hard Turner fan. However, it was incredible to see the works of both artists side by side as they grappled with representing Britain as the world changed and became more industrial. Turner’s wild landscapes and seascapes really do capture something of nature that few artists manage. And, for reasons that I cannot really explain, I decided to watch the first-ever episode of the hit US sitcom, E.R. I can confirm that it’s as good as it ever was.Finally, do check out LBC presenter Lewis Goodall’s new Channel 4 Dispatches documentary about why Sir Keir Starmer has had such a turbulent premiership. It’s well worth a watch.
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