The dream of a spring rate cut has officially fallen into the fog of war. In a rare unanimous move yesterday, all nine members of the Bank of England’s Monetary Policy Committee voted to hold the base rate at 3.75%. Just a few weeks ago, a drop to 3.5% felt like a “deal,” but the escalation in Iran has rewritten the rulebook overnight.
We are essentially in a “hawkish pause.” Governor Andrew Bailey’s message was clear: while the UK economy is showing signs of slowing, the Bank cannot, and will not, ignore the inflationary spike caused by $115-a-barrel of oil. They are playing a defensive game, waiting to see if these energy price hikes are a temporary shock or the start of a long, cold climb back toward 4% inflation.
For anyone with a mortgage, this “hold” is a bit of a double-edged sword. On one hand, it prevents an immediate jump in tracker rates; on the other, it has already spooked the “swap” markets that dictate fixed-rate deals. We’ve already seen the average two-year fix jump from 4.8% to 5.3% in less than a fortnight. The era of the “wait-and-see” borrower is becoming increasingly expensive.
I’ve spoken about high street lenders increasing rates here – High Street Lenders Increase Rates
If you were holding out for a “summer sale” on interest rates, it’s time to recalibrate. The Bank’s next meeting isn’t until April 30th, and the markets are already starting to price in a potential increase rather than a cut if the conflict persists. Staying informed and moving early on your remortgage isn’t just a suggestion anymore; it’s a necessity for looking after your monthly budget.
1. Why did the Bank vote unanimously to hold?
Before the Iran conflict, the committee was split. Now, the risk of surging energy prices causing a “second wave” of inflation has united them. They want to ensure inflation doesn’t spiral back toward 10% like it did in 2022.
2. Will my mortgage rate go up because of this “hold”?
If you are on a fixed rate, no. If you are looking for a new deal, most lenders have already raised their rates in anticipation of this news and ongoing global instability.
3. When is the next chance for a rate cut?
The next decision is on April 30, 2026. However, many analysts have pushed their “cut” predictions to late 2026 or even 2027, depending on how long the energy supply lines remain disrupted.