INTEREST rates will be left on hold this week, experts predict, as the Bank of England (BoE) adopts a “wait-and-see” approach regarding the war in the Middle East and closely monitors the inflationary threat posed by the soaring oil price. One did not rule out a rate rise, as policymakers seek to get ahead of the curve.
Vijay Rabadiya, Director at Borehamwood-based The Mortgage Vine, a broker, believes the most likely outcome this week is a hold in Bank Rate, with the Monetary Policy Committee (MPC) remaining cautious despite inflation easing from its peak.
He continued: “Geopolitical tensions in the Middle East have pushed oil prices higher and triggered a rebound in swap rates, as markets reassess inflation risks and the pace of future rate cuts. That has already led to lenders repricing fixed mortgages.
“As a result, borrowers may see mortgage rates move independently of the Bank Rate decision. Even if the MPC holds this week, swap volatility means pricing in the mortgage market could remain unsettled in the short term.”
Ben Perks, Managing Director at Stourbridge-based Orchard Financial Advisers, said “it’s hard to see anything other than a hold from the Bank of England”.
He continued: “Trump blew up all hope of a base rate cut two weeks ago. The knock-on effect of this war is not only British but global economic uncertainty. It’ll be a short meeting and an easy vote for committee members.”
Possible rate rise
Stephen Perkins, Managing Director at Norwich-based Yellow Brick Mortgages, agreed: “Due to the ongoing war in the Middle East, there is little chance of a base rate cut in the next six months, let alone this month.
“The best we can hope for is a hold at the current 3.75%, but an increase to 4% or perhaps higher is possible. Anyone thinking current mortgage rate spikes will quickly revert back down will be very disappointed.”
Babek Ismayil, CEO at homebuying platform OneDome, said: “Few would bet against a hold on Thursday as the Bank of England adopts a wait-and-see approach to events unfolding in the Middle East.
“With the oil price soaring, inflation is now a real threat and that could see rates hiked in future meetings of the MPC.”
Rohit Kohli, Director at Romsey-based The Mortgage Stop, said: “The war in Iran is the story here. It has pushed oil higher, fed straight into inflation fears and that has lifted gilt yields and swap rates. Once that happens, the case for a rate cut falls away very quickly.
“We are already seeing lenders raise rates on mortgages off the back of it. So for borrowers, Thursday matters less than the market moves underneath it. The problem is not Threadneedle Street holding but that the war has made mortgage pricing worse again.”
Hold “locked in”
Wesley Davidson, Director at Bristol-based FD Commercial & Bridging, believes “a hold at 3.75% is effectively locked in”.
He said: “Markets are pricing 85%-90%+ for no change on Thursday and, with oil prices spiking on Iran energy risks, the MPC will have no appetite to move. No cut is coming while oil is this volatile.
“April is the earliest realistic window if conditions settle. This will be a clean hold with a cautious tone. No panic, but cuts are delayed.”
But some are still holding out for rate cuts in 2026. Justin Moy, Managing Director at Chelmsford-based EHF Mortgages, added: “There will be no need for anything to change this time round, with the Bank of England likely deciding it’s best to wait and see what happens over the coming weeks.
“Where inflation is pushed more by world events than the behaviours of shoppers on the high street, there is no need to rein in spending or spook rates any more than necessary, and if the conflict does pass through in the next month or two, markets can get back to the slow and steady improvement in mortgage rates.”
