As mortgage holders brace for Thursday’s Bank of England interest rate decision, experts have united with one key prediction following the latest inflation data.
UK inflation was higher than expected in May, coming in at 3.4%, according to the Office for National Statistics (ONS). Most economists were expecting the rate to drop to 3.3%. This remains well above the Bank’s target of 2%, leaving most experts predicting the Monetary Policy Committee (MPC) to hold the Base Rate at 4.25%.
Matt Smith, mortgage expert at Rightmove, said: “As the rate of inflation stays above 3%, the expectation is that the Bank of England is set to act cautiously. Anticipation had risen that we may be in line for multiple Base Rate cuts this year at the peak of tariff uncertainty, but as some of these pressures have eased, this expectation has fallen back.”
Mr Smith suggested that forecasts for the rest of the year are likely to “jump around a bit” due to ongoing global uncertainty and changes in how the market expects things to pan out.
However, he added: “The current view is that we’re only expecting one more Base Rate cut this year, and tomorrow’s decision by the Bank of England is likely to be a hold.”
As for average mortgage rates, Mr Smith said: “These have stayed pretty flat for the last few weeks as the opportunity for lenders to lower rates has reduced. Despite this, we’re seeing an active housing market at the moment, with May having been the strongest full month for agreed property sales since March 2022.”
David Hollingworth, associate director at L&C Mortgages said the Bank of England’s “determination to ensure that inflation can be brought under sustainable control” means a rate cut tomorrow would be seen as a shock.
He said: “Slow and steady is likely to be the message once again, despite the concerns over a contraction in the economy.”
Mr Hollingworth noted that mortgage rates have been “harder to call” in recent weeks. He said: “After a period of fixed rate increases there’s now a more mixed move in rates with some lenders cutting deals again slightly, as markets find their level.
“Overall, it looks as though fixed rates may bobble up and down without any significant trend or shift either way. That said, there’s clearly a great deal of uncertainty as global events unfold. Borrowers would be better to focus on getting the best available rates and keeping under review, rather than second-guessing the next move in interest rates.”
Myron Jobson, senior personal finance analyst at interactive investor, added that the latest inflation report is “unlikely to be enough” for the Bank of England’s rate-setting Monetary Policy Committee to feel confident about cutting borrowing costs again on Thursday.
He said: “Uncertainty about the outlook for inflation, with Trump’s tariffs remaining the biggest wild card for the Bank of England despite the trade deal, combined with the recent spike in global oil prices, which exacerbates matters, means the Bank is likely to adopt a wait-and-see stance on interest rates tomorrow.
“Essentially, the reasons to hold rates seemingly outweigh those to cut, despite the recent contraction in UK economic growth.”
The Bank of England’s Monetary Policy Committee will announce its interest rate decision at 12pm on Thursday, June 19.