Following the latest review by the Monetary Policy Committee (MPC), the base rate has been kept at 3.75%. This had been predicted following the release of the latest inflation rate figure of 2.8%, which was lower than the expected 3% for the second month in a row.
This is the fourth consecutive time that the base rate has been held at 3.75%, following its reduction from 4% in December 2025.
Reduced pressure to increase interest rates
Inflation is still above the Bank of England’s (BoE) target of 2% but hasn’t run as high as expected. Usually, a method used by the BoE to keep inflation under control is to increase interest rates because doing so makes borrowing more expensive. This, in turn, leads to less demand and keeps prices lower. However, as softer-than-anticipated inflation has been experienced again, the BoE has been under less pressure to consider raising interest rates.
Will interest rates go up again?
There’s still uncertainty on the full impact of the Middle East conflict, with the potential for inflationary increases later in the year as price increases filter through. The next energy price cap also comes into effect on 1st July, with annual energy bills set to rise by 13% for millions of households. These factors mean that there’s a possibility of interest rate hikes in the future.
For now, though, the consensus has been to hold off on an interest rate increase and, instead, wait for further evidence of how the war has affected the UK.
What this means for mortgage borrowers
The fact that the inflation rate held steady at 2.8% was a surprise. Markets had already priced in potential increases to interest rates since the start of the Middle East conflict, which increased mortgage rates considerably. However, fixed rates for residential mortgages have gradually been getting cheaper since then.
The peace deal announcement has now caused swap rates, which are what lenders base their mortgage product pricing on, to reduce. This is good news for borrowers who are looking to take on a new fixed-rate mortgage deal.
Whilst those whose current fixed-rate deals are coming to an end are unlikely to find such low rates as they had before, they can at least benefit from the lower interest rates that have started to emerge. In fact, there are even mentions of potential mortgage price wars as lenders become more competitive with their rates to attract customers.
Expert advice from independent mortgage brokers
With a continually changing market, it’s worth reviewing your options to ensure that you’re getting the most out of your mortgage deal. As independent mortgage brokers, we’re not tied to specific lenders and can compare deals across the board, offering you impartial advice in the process.
Simply call us on 01322 907 000 to discuss your financial situation and mortgage goals. We’ll provide you with comparisons based on these and offer guidance that helps you make the most suitable decision for your needs.