British households are already paying the price, with the Bank of England confirming yesterday that UK inflation has risen to 3.3%, driven directly by the Iran conflict, and warning it is “likely to rise further this year.” More pain is set to land this summer.
Energy bills: the false relief of April
Energy bills fell to £1,641 on 1 April, down £117 (7%) from January under Ofgem’s price cap. However, analysts at Cornwall Insight now forecast the July-September cap will rise to £1,849, an increase of £208 (13%) on today’s level. Other forecasters put the figure higher, with EDF predicting £1,937 and E.ON £1,955, as wholesale gas prices remain significantly elevated by the Iran conflict.
Ofgem will confirm the July cap on 27 May, but the figure is already being set on today’s wholesale gas prices, which remain significantly higher than before the Iran war began. On Thursday, reports that President Trump was being briefed on plans for fresh military strikes pushed oil to a four-year high before Iran submitted a new peace proposal overnight.
Michael Davie, property expert at Scottish home improvement firm PureBuilt, said: “Most people saw their April bill drop and assumed the worst was behind them. It isn’t. The July cap is being set during the most geopolitically unstable period in years. If peace talks collapse, wholesale gas prices will move again and so will bills”
Mortgage market: biggest upheaval since mini-budget
At the same time, the UK mortgage market is experiencing its sharpest monthly disruption since the Truss mini-budget of November 2022. Average two-year fixed rates have hit 5.65% and five-year fixes 5.68%.
For a homeowner fixing a £250,000 mortgage today, that means £127 more per month, or £1,520 more per year than if they had it fixed in early March. Lenders have been pulling mortgage deals after an average of just eight days as they reprice.
Around 1.8 million UK households are rolling off fixed-rate deals this year, many secured at rates close to 1% in 2021. Yesterday the Bank of England held rates at 3.75%, the third consecutive hold, but its MPC voted 8-1 to hold, with Governor Andrew Bailey warning that “five different illustrative policy rules all point to higher interest rates now than they did in February.” The next base rate decision falls on 18 June 2026.
Davie added: “Combine energy bills about to jump 13% with mortgage rates up over 100 basis points in a month, and you’ve got a genuine financial squeeze coming for people who still think they’re in the clear. The homeowners acting now by insulating, upgrading, protecting the envelope of their home are the ones who’ll feel the benefit this summer. Those waiting for the news to stabilise will simply pay more for longer.”
Consumer sentiment already reflects the pressure. The More in Common Energy Bills Sentiment Tracker found 73% of Britons now rank energy bills as one of their top cost-of-living concerns, overtaking food prices for the first time, while less than three in ten (27%) say they could absorb further bill rises. GfK’s long-running Consumer Confidence Index has also dropped, with analysts warning it has further to fall in 2026. Only those earning more than £40,000 a year were more likely than not to say they could absorb further bill rises.
What happens next
Three dates now sit on homeowners’ calendars:
- Tuesday 27 May – Ofgem announces the July–September price cap.
· Wednesday 18 June – Bank of England base rate decision
Iran submitted a new peace proposal to the US via Pakistan late on Thursday. The White House declined to comment but said negotiations continue. The ceasefire, extended by Trump on 21 April to allow time for the Iranian proposal, has held since 8 April, but analysts at the Institute for the Study of War warn Iran is “unlikely to make meaningful concessions” and reports of fresh US strike planning have rattled markets as recently as this week.
Either way, Davie said, the window for households to act is narrowing: “Homeowners who prepare now will be the ones in control of their bills. Those who wait will be at the mercy of whatever the news delivers.”