Geopolitics and weak growth complicate the path to lower rates
Most brokers expect the Bank of England to hold the base rate at Thursday’s meeting, arguing that renewed inflation risk — driven by geopolitics and energy prices — leaves policymakers little room to ease.
“I think the most likely outcome is that the Bank of England will hold the base rate for now, but it is a finely balanced decision,” said Aaron Strutt (pictured top left), product director at Trinity Financial. “Many people will be hoping the base rate is cut to boost the economy, but this seems unlikely as the ongoing uncertainty and worry about inflation and the money markets reactions will be on the MPC’s minds as well as the UK economy’s failed growth in January.”
Gerard Boon (pictured top right), managing director at Boon Brokers, also expects no change, pointing to oil-linked inflation pressures. “I'm confident that the Bank of England's Monetary Policy Committee will hold their base rate in their next decision meeting,” he said. “This is because of the global unrest in the Middle East, where oil supply shortages are causing inflationary spikes across all western economies.”
The Bank of England kept the base rate unchanged at 3.75% in February, pausing after December 2025’s quarter-point cut. Market pricing has since shifted sharply: investors are now largely expecting no cuts for the rest of 2026, and are even pricing in the Bank Rate rising back to 4% by June 2027.
A Mortgage Introducer poll also suggests a cautious mood among readers. Half of respondents said they did not expect any Bank of England rate cuts in 2026, while about a third anticipated only a single reduction.
Behind the rate call sits a more immediate issue for borrowers: the cost of fixed-rate mortgages has been rising sharply, and both brokers said clients are responding by trying to secure deals early rather than waiting for the Bank’s statement.
“Most of our clients are not that worried about the base rate decision for the moment now that lenders are putting their fixed rates up by so much,” Strutt said. “They just want to know when the price hikes will stop.”
Boon argued that focusing on the base rate risks missing what actually drives pricing in much of the market. “Mortgage rates are set independently to the Bank of England’s base rate, unless they are linked to tracker deals,” he pointed out. “Mortgage rates are largely controlled by swap rates, influenced by the wider global financial market.”
That distinction is shaping advice. Boon said his firm is encouraging clients to act early to secure an offer window, particularly for those approaching the end of a fixed term this year. The aim, he said, is to reduce exposure to further repricing if wholesale funding costs move higher.
Product choice, however, is becoming harder to generalise. Boon said that if the conflict proves short-lived, products with low or no early repayment charges could help borrowers refinance quickly if rates fall. If higher inflation persists and rates remain “sticky”, he suggested longer fixes may suit some — but only where they align with borrowers’ plans.
Strutt’s view was that the usual trade-off between certainty and flexibility has become more time-sensitive as pricing shifts. He pointed to the choice between fixing for the right term and using tracker-style flexibility where a move, or a change in circumstances, is likely.
On the broader path of rates, Strutt said the direction still appears down over time, but warned the route may be uneven. “Some private banks are saying the Bank of England is now expected to raise interest rates rather than cut them this year due to a surge in oil prices sparked by the ongoing hostilities between the US, Israel, and Iran,” he stated. “Although it is too soon to tell what is going to happen it will be an interesting few months, that’s for sure.”
Boon, meanwhile, said the next six to 12 months could be shaped as much by domestic weakness as energy costs, with recession risk potentially pulling the central bank towards cuts if demand falls and deflationary pressure builds.
“There are so many factors at play that can influence the UK’s mortgage interest rates,” he stressed. “Therefore, to reiterate, borrowers should select a mortgage product to suit their current situation and future plans, rather than on the basis of external factors.”
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