If you were quietly hoping your mortgage payments might get a little cheaper soon, you’ll probably want to sit down for this one.
The Bank of England is widely expected to hold interest rates at 4.5% when its Monetary Policy Committee meets this week, dashing hopes of a third consecutive cut following the reductions seen through late 2024. The last cut came in December, and since then, the path forward has grown considerably murkier.
A large part of the hesitation comes down to instability in the Middle East. Renewed tensions in the region have pushed oil prices higher, which feeds directly into UK inflation figures. With the Consumer Prices Index already proving stubborn, the MPC isn’t in a rush to loosen the purse strings just yet.
“The committee will want to see more convincing evidence that inflation is truly beaten before moving again,” one City economist noted this week. “One bad set of energy figures could unwind months of progress.”
It’s a frustrating position for homeowners on variable or tracker mortgages, who’ve been watching and waiting since rates peaked at 5.25% in 2023. The relief of two cuts last year felt like the start of something. Right now, it feels more like a pause.
The broader economic picture isn’t helping either. UK growth has flatlined, wage growth remains elevated at around 5.6%, and the Treasury is under its own fiscal pressures after October’s Budget. The Bank finds itself trying to thread a very narrow needle.
Not everyone thinks this is the wrong call. Some economists argue that cutting too quickly risks reigniting the kind of inflation that took years to tame. Patience, they say, is a feature rather than a bug. That argument lands a little differently when you’re paying £1,400 a month on your mortgage, mind you.
The committee’s decision is due Thursday, and while a hold looks near-certain, all eyes will be on Governor Andrew Bailey’s language. Any hint that a cut is on the table for May could move markets quickly.
The real question isn’t whether rates hold this week. It’s whether the Middle East, and the global uncertainty it’s stirring up, gives the Bank any room to move at all before summer.
