Financial markets have a date in mind, but some economists aren’t buying it
Inflation concerns are continuing to mount in the UK amid rising fuel prices while a choppy bond market is sowing uncertainty for the mortgage rate outlook – but some experts say the Bank of England will keep Bank rate on hold for the rest of this year before hiking in early 2027.
The central bank raised rates for the first time in over three years last week, moving its trendsetting interest rate to 4.0% with a quarter-point jump. But while financial markets are increasingly confident of another hike in December, economists aren’t so sure.
Sixty-four of 65 economists polled by Reuters this week expect the Bank to hold rates steady when it meets on December 17 before hiking in February next year, although much will depend on a slew of economic data scheduled to arrive in the weeks ahead.
Experts say the most significant factor in the BoE’s deliberations will be the next inflation reading, set for November 18, which will reveal whether fuel price growth is spilling into other areas and putting further upward pressure on inflation.
Earlier this month, a Financial Times survey of economists showed expectations that overall British inflation will climb to an average of 4.4% at the beginning of next year, significantly higher than the central bank’s 2% target.
The consumer price index (CPI) currently sits at 3.5%, and energy costs and fuel bills could spike even further at the turn of the year if the US-Iran war – which has sent global fuel prices surging – rumbles on.
What the BoE’s next moves will mean for mortgages
If the BoE holds steady in December before hiking rates in February, mortgage rates would still be unlikely to remain unchanged throughout that period.
Lenders don’t wait for the Bank’s Monetary Policy Committee (MPC) to act. Instead, they price off swap rates, which move on expectation and financial market analysis of when the central bank will raise rates next.
A December hold wouldn’t be read as relief. The MPC’s language has drifted toward a hawkish tone through the second half of this year, with eight of nine decisionmakers backing the November hike, and leaving rates unchanged in its last announcement of the year almost certainly wouldn’t be interpreted as a pivot back towards cuts.
Two- and five-year fixed rates have already been climbing since the energy shock took hold at the onset of the war in spring, and they’d probably face further upward pressure if market expectations of a rate raise in either December or February grow.
Borrowers on base-rate trackers saw an immediate 25-basis-point increase in November. If February sees the BoE hike Bank Rate to 4.25%, tracker borrowers would have absorbed 50 basis points’ worth of increases in the space of about three months.
Borrowers whose fixed deals expire in early-to-mid 2027, meanwhile, face the decision between locking in now under current fixed rates or waiting and risking rats moving higher if February’s hike is followed by more.
What the BoE has done so far this year
The year began with the Bank Rate already at 3.75%, its lowest level since early 2023, after the central bank cut rates four times throughout last year.
February and March saw decisionmakers back a hold, but the outbreak of that US-Iran conflict at the end of February resulted in inflation forecasts changing dramatically and a sudden shift in financial markets toward rate hike expectations.
Bank of England base rate, 2020–2026
Bank Rate (%), all MPC decisions
Source: Bank of England. Nov 2026 is the most recent decision. Dec 2026 meeting scheduled 17 December.
At the April 30 meeting, the MPC voted 8-1 to hold Bank Rate at its existing level – but chief economist Huw Pill dissented in favour of an immediate hike, the first vote for a rate increase since 2023.
In June, dissent widened as the vote came in at 7-2 in favour of a hold. External member Megan Greene joined Pill in voting for a bump to 4%. Three voices dissented at the July rate hold, a 6-3 vote that was mirrored in September.
On November 5, the MPC voted 8-1 to increase Bank Rate by 25 basis points to 4% – and the lone dissenter, Catherine Mann, backed an even bigger rate jump of 50 basis points.
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