British homeowners are paying an average of £840 a year more when they refinance their mortgages, as rising borrowing costs triggered by the Iran war impact spending power.

Approximately 1mn households have rolled off fixed-rate deals since February, according to Bank of England data, paying £50 to £70 a month more than rates before the US-Israeli attacks on Tehran. A homeowner refinancing a £500,000 mortgage with a two-year fix could see interest payments rise by over £250 monthly, paying an extra £6,144 over two years.

"This adds to the already very large increase [in payments] they were going to face," said Andrew Goodwin, UK economist at Oxford Economics. "You worry for some borrowers: it will be very punitive and could be the factor that tips them into arrears."

Prime Minister Andy Burnham has made cost of living a key priority since July. The quoted two-year fixed rate rose from 3.97% to 4.92% between February and August. James Tatch of UK Finance estimates 700,000 homeowners will come off fixed deals between July and December, with an average balance of £164,000.