At its June meeting, the MPC voted by a majority of 7–2 to maintain Bank Rate at 3.75%, with two members voting to increase it by 0.25 percentage points to 4%. That dissent — the first vote for a rate increase in the current cycle — marked a notable shift in the committee’s internal balance. The meeting took place against an unusually complex backdrop, with the conflict in the Middle East creating significant uncertainty around global energy prices and the UK’s inflation outlook.
Paul Heywood (pictured right), chief data and analytics officer at Equifax UK, said borrowers on variable mortgage rates should not expect relief on their monthly payments this year, with the risk of rate increases adding further uncertainty for households. “The door looks firmly shut on the prospect of rate cuts for the foreseeable future,” he said.
“Those on variable mortgage rates are unlikely to see any reduction in their monthly bills this year, while the rising possibility of rate hikes is adding another layer of uncertainty to households, which have so far proven resilient but are without doubt feeling the squeeze.”
Equifax data indicates that one in 10 new UK mortgages are now being arranged on terms of 35 years or longer, as borrowers extend their repayment periods to reduce short-term monthly outgoings at the cost of higher overall repayments.
For brokers advising clients, the message from industry figures is that waiting for a better rate may carry its own risks. “Inflation ticking down is a reminder that in today’s geopolitical climate, mortgage rates don’t stay predictable for long,” said Ben Thompson, director of home moving strategy at Mortgage Advice Bureau. “This drop puts the Bank of England’s next move back in the spotlight – albeit we currently expect no further increase to the base rate, as domestic economic performance still remains weak.”