Trump and Iran tensions put UK mortgage lenders on a knife-edge

Mortgage lenders across the UK are operating with an unprecedented level of caution as geopolitical instability – driven by renewed tension over Iran and US President Donald Trump's unpredictable economic messaging – continues to destabilise gilt markets, push energy prices higher, and erode first-time buyer confidence.

Denni Tyson (pictured top), founder of DT Financial in Kent, told Mortgage Introducer the mood among lenders and clients has shifted sharply in recent weeks.

"I said a few months ago, isn't it amazing how one person can type a thing on a phone and it changes the entire economic landscape of the world," he said. "Whatever Trump posted would affect everything. There's no real way to challenge it, really. You just have to let nature take its course until he stops talking for five minutes. Because whatever he does, he causes a problem and uncertainty."

Lenders on a knife-edge

Tyson said he has rarely seen mortgage lenders as cautious as they are now, describing a market walking a tightrope between fragile rate optimism and the threat of further geopolitical shocks.

"I don't think I've ever seen a banking system so cautious in my life," he said. "They are just on a knife-edge. They don't know what's coming. It just affects everything – pricing, markets, gilts. You name it. It just shakes the world."

Gilts have remained volatile since the Iran conflict escalated earlier this year. The Bank of England's Monetary Policy Committee (MPC) voted 7–2 to hold Bank Rate at 3.75% at its June meeting, with two members voting for an immediate rise to 4%. Services inflation stood at 3.7% and the Consumer Prices Index (CPI) at 2.8% in May, keeping the committee cautious ahead of its next decision.

Tyson predicted the picture could shift at the next MPC meeting, scheduled for 30 July, and said he would not be surprised if the committee moved to raise rates, citing the cumulative pressure of the Iran conflict and its pass-through into energy pricing. His view is his own assessment, and the base case among economists remains a hold, but a rise to 4% is considered a realistic possibility if services inflation stays sticky.

"I think that could be the one where they'll pop it up because of what's gone on in the last few months with Iran,” he said. “The banks are cautious, and they will be cautious. If I'm honest, that's just nature."

Planning ahead in a volatile market

For brokers on the ground, Tyson said the practical response to rate uncertainty comes down to discipline. He urged clients not to wait out their mortgage term passively, warning that a single erratic moment in markets could prove costly.

"As soon as that six-month window comes, you just get something sorted," he said. "You might think I'm bonkers, but it only takes one erratic moment, as we've all seen, and you end up losing thousands. It could cost you thousands if it does go up."

He also criticised the notice period lenders give brokers before pulling or repricing products, an issue he said created unnecessary stress for clients during volatile periods. Brokers have long called for greater transparency around lender repricing windows, with little movement from the industry so far.

"Some banks give us a day or two, some barely give you six hours," Tyson said. "I've said for years they should change that because it's not fair. They just don't care. All they care about is pricing."

Buyer confidence taking a hit

Tyson said the geopolitical backdrop was also beginning to weigh on buyer appetite, particularly among first-time buyers in London and the South East, where affordability pressures have intensified alongside rising mortgage rates this year.

"I think there's less of an appetite to buy at this moment in time because of the cost associated with it and the mortgage rates," he said. "But also, partly the sheer unsteadiness of the world is impacting it. People are a bit like – hold off until I get some clarity."

He added that the cumulative effect of global uncertainty – from US trade policy to the Middle East conflict – had made it harder to encourage prospective buyers to act, even when the fundamentals of their personal finances were sound.