Mortgage experts say they have accepted the Bank of England’s decision to keep the base rate at 3.75% today.
The Bank’s Monetary Policy Committee (MPC) voted unanimously in favor keep the base interest rate at its current level.
The decision to hold the base rate came as most MPC members decided that the inflationary impact of the war in the Middle East made cutting rates too risky.
The conflict has led to a rise in swap rates, which increases the costs of fixed-rate mortgages.
Before the conflict broke out, lenders had priced in a cut to the base rate in March and expected at least one more cut in 2026.
The next MPC decision will take place on April 30.
Steve Cox, Chief Commercial Officer of Fleet Mortgages, said: “A month ago a cut in the Bank’s base rate looked almost certain at this meeting, but the global picture has changed dramatically in a very short space of time.
“The war in Iran, the conflict in the Middle East and the wider instability it has caused, particularly the sharp movements in oil prices, have understandably made the MPC much more cautious.
“Energy costs are directly linked to inflation expectations and, given the potential knock-on effects for the UK economy, it makes sense that the MPC has chosen to pause and give itself time to see how these events develop before taking the next step on rates.”
While this MPC decision was widely expected, there is a chance that the base rate will rise later this year, said John Phillips, CEO of Just Mortgages and Spicerhaart.
Phillips said: “It is a relief to see the MPC sitting idle at its first meeting since the conflict in the Middle East. Speaking to industry colleagues, there was certainly concern that we would see the central bank respond with a rate hike.
“That said, it is difficult to predict where we are headed and what the future path of interest rates looks like now. Much depends on how long this conflict lasts and the impact it has on prices and inflation more broadly. We should not rule out the prospect of increases in the future.”
The possibility of a future increase in the base rate was also shared by Mark Harris, CEO of SPF Private Clients.
Harris said: “Market expectations for another two or three quarter-point rate cuts this year have resulted in a decline in swap rates, which underpin the pricing of fixed-rate mortgages. With market expectations that these cuts will not occur and the possibility that rates may even rise at some point, swaps are extremely volatile and have moved back up.”
CEO of RAW Capital Partners, Tim Parkes, said: “Today’s grip changes very little. The mortgage market still faces a high degree of uncertainty, and much of this is driven by events outside the UK. Geopolitical instability is once again fueling inflation expectations, market sentiment and borrowing costs, making the outlook for the mortgage and buy-to-let sectors difficult to predict.
“That uncertainty has a direct impact on lender behavior, with product prices still changing rapidly as lenders respond to shifts in swap rates and a more uncertain backdrop. This increases pressure on brokers, who must navigate a market where product availability can change at short notice and certainty is harder to provide.”