‘A rise is still on the cards' - Brokers react as BoE holds base rate

Mortgage brokers have urged borrowers to act quickly on fixed-rate deals rather than wait for relief, after the Bank of England's Monetary Policy Committee (MPC) held the base rate at 3.75% for a fifth consecutive meeting on 30 July, with the vote split widening to 6–3, up from 7–2 in June.

The shift in voting and continued volatility in swap rates meant the hold offered little practical comfort to borrowers seeking cheaper deals. The Middle East conflict, and its effect on oil prices and inflation expectations, has dominated broker reaction.

Jeni Browne (pictured top middle left), sales and marketing director at Mortgage Finance Brokers, told Mortgage Introducer the decision itself had become almost secondary to the forces shaping it. "What's notable about today isn't really the decision itself, as most of us were expecting the hold," she said. "It's how much the MPC's hand has been forced by events entirely outside the UK. At the start of the year, two cuts were still expected in 2026. That's now gone, largely because of oil price swings tied to the Middle East conflict."

Browne added that forecasts for where the Bank of England's base rate lands by year-end now range from 3.5% to 4.25%. "For borrowers, the old strategy of just watching UK inflation data isn't enough anymore," she said. "Geopolitical headlines are moving swap rates as much as domestic economic data is, which makes fixed-rate pricing more volatile and harder to time than it's been in years."

What the vote split signals for September

David Hollingworth (pictured top left), associate director at L&C Mortgages, told Mortgage Introducer the 6–3 split deserved attention even if the outcome was not surprising. "Edging towards a rise was not unexpected," he said. "But 6-3, that still feels that actually the bank's leaving the taking away and see approach, recognising that the pressure is coming from energy cost and of course interest rate rises don't immediately impact that."

Hollingworth noted some MPC members had not entirely closed the door to resumed cutting should the geopolitical picture improve, but he was careful to contextualise it. "I think the rest of the tone is that the risk is to the upside and that rates may have to climb." For borrowers on variable or tracker deals, he said the hold bought time but not certainty. "Those who are on some kind of variable deal or a tracker deal, immediately it's good for them because they might have been bracing for a rate rise. It doesn't mean that they can assume that's not going to come further down the line."

Fixed rates climbing regardless

Harry Arnold (pictured top right), director at Anderson Harris, told Mortgage Introducer the hold was unlikely to translate into meaningful lender repricing. "I think the swaps market, which is really what governs mortgage pricing, is sort of where it is," he said, noting that swap rates were at approximately 4.2% at the time of the decision, pricing in roughly two further base rate hikes. He added that the tight vote could push them higher still. "Swaps might actually increase a little bit because it was a much tighter vote at 6-3 rather than 7-2."

Arnold said the September outlook depends heavily on events in the Middle East. "If there's a peace agreement announced in a week's time and there's a consensus growing that it will be a lasting peace, commodities can start flowing out of Hormuz," he said. "I'm not convinced we're going to get multiple interest rate hikes over the next few months. Maybe one or two."

What does this mean for borrowers?

Nicholas Mendes (pictured top middle right), mortgage technical manager and head of marketing at John Charcol, told Mortgage Introducer a September hike remained possible. "I still think in the next announcement a rise is potentially still on the cards, when we look at what's happening in Iran," he said. He saw limited near-term lender movement, however. "Swaps have settled from where they were over the last week or so, and there's certainly room to see some lender reductions, albeit very small ones."

His advice to borrowers is to stop trying to time the market. "For borrowers, the key message is try not to predict what's going to happen too much," he said. "If you're remortgaging in the last three, four or six months, it's about speaking with a broker and trying to get a deal secured." The House of Commons Library's latest monetary policy briefing notes that UK CPI inflation stood at 2.6% in June, above the MPC's 2% target – a figure the Bank had previously expected to fall back before the Middle East conflict disrupted that trajectory.

Mendes also flagged the product term decision as one advisers should raise in every client review. "Think really carefully about a two and a five year if you are looking at fixed-rate stability," he said. "Because while two years always benefits from regular review, is that time still too short given the landscape and is a five year better?"

Hollingworth's closing message for advisers is unambiguous. "It boils down to fixed rates have been and could continue to climb in the near term and therefore advisers will often be looking to get customers onto the best deal they can now and then if things do improve, rejig things before completion if appropriate," he said. "Borrowers are going to have to brace for the potential for rates to rise. Plan for the worst and hope for the best."

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