UK inflation fell to 2.6% in June, but brokers say lenders have already priced the opposite – and clients are feeling it
The Consumer Prices Index (CPI) fell to 2.6% in the 12 months to June, beating analyst forecasts and easing pressure on the Bank of England ahead of its 30 July rate-setting meeting.
The base rate has sat at 3.75% since the start of the year, and with several monetary policy committee (MPC) members having previously signalled concern about above-target inflation, June's softer reading is now broadly expected to prompt a hold.
But for mortgage brokers working with clients facing imminent remortgages, the positive headline told only half the story. With swap rates already elevated following renewed tensions involving Iran, many lenders had repriced upwards before the data even landed.
"The market has already responded," Nouran Moustafa (pictured top right), executive financial and mortgage adviser at Roxton Wealth, told Mortgage Introducer. "I wouldn't say all the lenders, but around 90% of the lenders have already hiked rates up."
Headline figures, real-world pain
Moustafa questioned whether official inflation data captures the pressure households are actually under. "I don't really think that the inflation figures are realistic," she said. "How is the inflation going down when everyone is struggling? Mortgage rates are up, bills are up, everything is up."
She pointed to a marked rise in debt consolidation enquiries at her firm as evidence of a disconnect between the data and lived experience. "This year I have seen a huge amount of debt consolidation cases. I would say one out of every five cases I do nowadays is debt consolidation. If we compare inflation to the amount of insolvencies and the amount of company liquidations, it doesn't match."
The sentiment on the ground echoes a broader tension that has characterised the UK mortgage market throughout 2026, a period in which base rate stability has done little to steady actual mortgage pricing, with swap rate volatility repeatedly overriding the official rate signal.
Amar Dhanota (pictured top middle left), director and senior mortgage consultant at London FS, offered a more cautious reading of the data. While the drop in inflation appeared positive on the surface, she told Mortgage Introducer the market remained unsettled and lender risk appetite could shift quickly as a result. "Anytime things drop or go up, the market does get nervous, and this in turn can change the risk appetite for lenders. Obviously, the market's a little bit all over the place at the moment, so when the data came out today and inflation has dropped, from the surface level that sounds like good news. However, it's still likely to be fluctuating for a period of time which is an important consideration when speaking with clients and looking at the wider impact of inflation."
What does it mean for clients coming off fixes?
Luther Yeates (pictured top middle right), founder and head of mortgages at Orton Financial, told Mortgage Introducer the inflation data had done little to clarify the picture ahead of next week’s MPC meeting. Lenders had been raising rates in recent weeks, and he said it is not straightforward to attribute that entirely to the conflict in Iran.
"The only part that's unclear is whether it's directly related to that or whether it's related to the next Bank of England assessment," he said. "Because what the banks often like to do is they do like to move their rates in advance of that, so then it means that they feel like they've got a bit more manoeuvrability if the rate does change."
He added that the tracker mortgage conversation had become increasingly common as clients weighed up their options against a shifting rate backdrop. "A lot of clients are drifting towards the trackers because if you jump on mortgage sourcing and just plug in the basic numbers, it's tracker products which generally are coming out more competitive than a fixed rate." He said a second conversation is often needed before clients were willing to engage seriously with the idea, and that active management is now essential if the Bank of England moved.
Yeates also noted widespread confusion among borrowers about the relationship between the base rate and their mortgage – a challenge that had grown as swap rate volatility has increasingly driven lender decisions. "A lot of people think this is the main thing which is going to actually impact and set my mortgage rate," he said. "Whereas actually, unless they're on that direct base rate tracker, it has no real bearing at all. And as we know, the pricing of their mortgage actually is more likely to be impacted by something happening thousands of miles away than it is by a decision made in London."
Dhanota said the media's focus on headline rates is creating a distorted conversation between brokers and clients. “I have clients calling asking what rate are you able to get as I have seen a rate of x% online and want to see if you can get a lower rate. My approach is, I'll say, okay, let's forget about the rate for one second. Let's discuss how much you can afford each month and work it backwards, and look at your specific situation and which lender will consider your application. And then what transpires out of that exercise is the rate in itself is not the most important factor, you may not be eligible for the lowest rate available, and lender fees and costs also need to be considered, and of course the monthly payments needs to align with your budget and affordability.”
Stability, not cuts, is what brokers want
Alan MacKenzie (pictured top left), founder and director of Your Next Step, told Mortgage Introducer the June data is a relief, particularly given earlier fears the Iran conflict would push inflation higher than expected. "Inflation today reported really well. That was really positive to see because I think this was the latest one that we were expecting to see the conflict in Iran starting to hit and it's not really transpired, which will hopefully be good for the Bank of England moving forward as well."
MacKenzie said he now expected the MPC to hold rather than raise rates. "I think there's a lot of economists expecting one rate rise now where two was expected. But again, from this news this morning, we might just see a staying level at this 3.75% for the foreseeable, which is good."
But the volatility of recent months had taken its toll operationally. He described the experience of receiving lender repricing notices with little or no warning as one of the most difficult working conditions brokers had faced. "As a mortgage broker, when you're given minimal notice, it can be 2 o'clock in the afternoon, you're getting notice that the interest rates are changing the next morning for that lender that you are planning to work on the next day and you're having to drop everything. It's horrible."
MacKenzie welcomed the positive inflation data as a potential turning point for rate expectations, but said patience remains essential. "We're more tuned to what the Bank of England are doing. But with inflation, that's the kind of starting point I think with our conversations."
For Moustafa, however, the numbers still don’t add up. "We have been on 3.75% since the beginning of the year. We are even expecting more cuts. Lenders are hiking rates up because the reality is simple. Inflation is not down, rates are not down, the cost of money is high, and people will suffer and struggle."
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