Iran war peace deal to finally bring relief to cash strapped UK households

Iran war peace deal to finally bring relief to cash strapped UK households It has been a long time coming but there could be reasons for hope for hard-up households, with oil and pump prices falling, no sign of an interest rate hike, and inflation rising less than feared Millions of households battling soaring bills were given hope as oil prices fell to a three month on the back of the Middle East peace deal. The Bank of England is also set to keep interest rates on hold - rather than announce a hike - this week, bringing some relief to borrowers. Mortgage rates are also expected to continue easing. Motorists are finally benefiting from lower pump prices, with petrol at the lowest level since early April. And while figures out this week are set to show inflation rose last month, economists now believe the peak will be less than first feared after the outbreak of the war between the US and Israel and Iran at the end of February. The price of Brent crude oil dropped more than 4% to $83 a barrel after US President Donald Trump claimed a peace deal with Tehran would open the key Strait of Hormuz. Global stock markets staged a more than £500billion rally on hopes that a ceasefire between the two sides will last. The UK’s FTSE 100 was up in early trading, but only by around 30 points. Clive Black, head of consumer research at broker Shore Capital, said: “It is not yet time to put up the bunting but there could just be some better news ahead.” The Middle East war and the subsequent surge in oil prices have hammered attempts to bring inflation back under control. At one during the conflict, oil reach almost $120 a barrel. However, the price dropped to the lowest since March after President Trump and Iran’s deputy foreign minister said they had reached an initial deal to end the war and to resume traffic through the Strait of Hormuz. Pakistan, which has brokered a deal, said the two sides are due to sign a memorandum of understanding in Switzerland on Friday. Experts warned it would take some time for oil and gas shipments through the Strait to return to pre-war levels, aside from the extensive damage caused to oil facilities in the region. And the impact on other shipments, including fertiliser, will be felt for even longer. “Markets have finally got the news they’ve longed for since the beginning of March as the end of the Iran war is more clearly in sight,” says Russ Mould, investment director at broker AJ Bell. “The framework deal is a major step forward to ending the conflict, although it is still not officially signed and remains light on detail. “Markets seem cautiously optimistic there won’t be any setbacks to getting it over the line, albeit investors are aware the narrative can change at the click of a finger. A full celebration is off the cards until the ink is dry on the deal.” The cost of filling-up was one of the first economic shocks for households here when the Middle East war erupted. And it could be where many people see the upside, if the ceasefire holds and as long as retailers pass on savings. According to the AA, petrol averaged 156.5p a litre and diesel 177.9p a litre ahead of the weekend. However, petrol remains more than 23p a litre dearer than at the start of the Middle East conflict and almost 25p a litre above where it was this time last year. “With just over a month to go before the start of the summer holidays, there is a much better prospect of spending less at the pumps and more at holiday destinations,” says Luke Bosdet, the AA’s spokesman. “That will also be a something of a relief for the tourism industry, although war-hiked road fuel prices will still hurt resorts compared to last year. Then, a tank of petrol cost £72.60 but now costs £86.08.” Meanwhile, the Bank of England is expected to hold its base rate at 3.75% when its Monetary Policy Committee votes this week. Lenders have already begun offering lower fixed rate mortgage deals in anticipation. The average two year fixed rate home loan has eased to 5.61%, with a typical five year deal down to 5.58%. Adam French, head of consumer finance at Moneyfactscompare.co.uk, said: “Mortgage borrowers will breathe a sigh of relief at the news of a peace deal in Iran. While we are far from being out of the woods yet, a lasting peace deal should dramatically reduce the risk of the Bank of England’s worst-case scenario for inflation and interest rates becoming a reality. “Under that scenario, Base Rate could have risen to 5.25%, potentially pushing typical rates on new mortgages towards 6.75%. Instead, today’s news means mortgages rates, which have already been slowly falling for several weeks, have likely already passed their peak – at least until the next unwelcome crisis. “Borrowers can be optimistic but with a word of caution, as inflation and economic data will continue to influence the outlook. However, a lasting peace should remove one of the biggest risks to mortgage costs and may help restore a more stable environment for hard-pressed remortgage borrowers and prospective buyers.” Figures from the Office for National Statistics on Wednesday are expected to show inflation rose in May, having dropped to 2.8% in April, thanks in part to Ofgem cutting its energy price cap for tens of millions of households. However, it is predicted to come in lower than the 3.3% it reached in March.