What's happening to UK interest rates and what does it mean for mortgages?
At the start of the year, the Bank had been expected to cut interest rates twice in 2026, with the first drop predicted to come
At the start of the year, the Bank had been expected to cut interest rates twice in 2026, with the first drop predicted to come in March or April. However, the increase in fuel prices and inflation after the outbreak of the conflict has upended all of this. Oil prices initially rose sharply as a result of disruption to supplies in the region, but have dropped back when various ceasefires have been agreed.
On 18 June, Bank of England governor Andrew Bailey said that the price falls seen after the latest deal were "encouraging". But he warned that the higher energy prices of the previous four months meant "there [was] already some inflationary pressure in the pipeline". He said the Bank job was to ensure that didn't turn into "sustained inflation above our 2% target".
Oil prices rose again when the US and Iran resumed attacks in the Strait of Hormuz in July. UK household energy bills are also expected to go up after the latest increase in the price
cap which took effect on 1 July, which could push UK inflation higher. Given the uncertainty, many analysts think rates are likely to stay at 3.75% at the Bank's next meeting on Thursday 30 July.
The BriefWire