Banks Brief Reeves on Iran Conflict's Economic Fallout

Senior leaders from the United Kingdom’s five biggest retail banks are due to meet Chancellor Rachel Reeves in London this week to discuss how the conflict involving Iran could affect the UK economy. The banks expected to attend are HSBC, Barclays, Lloyds, NatWest, and Santander. Officials and executives are set to focus on steps that could limit spillovers to households and the wider financial system.

The talks are expected to concentrate on support for consumers seen as most exposed to a deterioration in economic conditions. A central issue is borrowers who may face higher mortgage rates, particularly as fixed-rate deals roll off. Participants are expected to review banks’ commitments under the government’s mortgage charter, including measures intended to help 1.6 million customers whose fixed-rate mortgages are due to expire by the end of the year.

The meeting comes as energy prices have risen after Iran’s actions in the Strait of Hormuz, developments that have fed into forecasts for higher inflation and increased mortgage costs. The Bank of England has projected that more than 1 million UK households could see higher loan servicing costs.

The same pressures have also been reflected in mortgage market conditions, with banks pulling roughly 1,500 mortgage products and raising interest rates on 7,000 others, according to the information cited.

Beyond the near-term refinancing wave, the Bank of England has estimated that around 5.2 million borrowers—58% of the total—could be paying more on their mortgages by the end of 2028. That projection underscores why policymakers and lenders are treating mortgage affordability as a key channel through which external shocks can reach the domestic economy. The planned discussions are framed around cushioning vulnerable consumers while maintaining orderly credit markets.

The timing also overlaps with banks preparing their year-end financial results, which are expected to include updated views on the UK economic outlook. Any revisions to assumptions around inflation, household finances, and credit performance could influence how banks present risk and resilience to investors and regulators. However, the precise outcomes of the meeting, including whether additional measures will be announced, were not specified.