The Bank of England (BoE) has decided to keep the base rate at 3.75%, the same level as at its February Monetary Policy Committee (MPC) meeting. The decision was unanimous, and the key factor influencing the hold is the ongoing US-Iran conflict and broader Middle East tensions, which affect energy prices and, in turn, inflation in the UK.
Just a month ago, markets were expecting rate cuts. In February, the MPC voted 5:4 in favour of holding the rate, and some analysts predicted at least two cuts in 2026. But the escalation of conflict and the resulting energy price uncertainty has shifted expectations, leading to a more cautious approach by the Bank.
Why the Base Rate Remains Unchanged
Experts say the MPC’s decision makes sense given the global situation:
Energy prices: The conflict in Iran and wider Middle East instability are driving fluctuations in oil and gas prices, which directly feed into inflation.
Inflation pressure: The MPC wants to avoid cutting rates too soon and risking a resurgence of higher inflation.
Economic uncertainty: It is difficult to predict how long the conflict will last and what impact it will have on the UK economy.
Steve Cox from Fleet Mortgages notes that mortgage markets react quickly to changes in rates and funding costs, with lenders frequently adjusting products. Colin Bradshaw from TwentyCi adds that keeping rates steady supports market stability, though the usual spring property surge may be slower than expected.
What This Means for Mortgage Borrowers
For those with fixed-rate mortgages ending soon, the message is clear:
No rate cuts means banks are not rushing to offer cheaper deals.
Borrowers expecting lower rates may now face higher interest costs when switching to a new deal.
If rates stay elevated for months, delaying action could cost significantly, particularly for large mortgages.
Experts note that a swift resolution of the Middle East conflict could change the outlook, but for now, higher mortgage rates are more likely than lower ones.
What About Savers?
At first glance, higher rates seem good news for savers, with better returns on savings accounts and term deposits. But there’s a catch:
If inflation remains above 3%, the real value of savings may still decline.
Banks tend to raise mortgage rates faster than savings rates, meaning the benefit to savers may be limited.
Market Outlook
Analysts from Hargreaves Lansdown, Stonebridge, and Mortgage Advice Bureau highlight that:
The MPC is likely to remain cautious until the geopolitical situation stabilises.
Rate cuts could be delayed until late 2026 or beyond.
The property market may slow down, as higher borrowing costs and no rate cuts reduce affordability.
While holding rates protects current borrowers from sudden cost spikes, the situation requires close monitoring, as any new energy shock or inflation surge could force the Bank to raise rates further.
Key Facts at a Glance
Bank of England base rate: 3.75% (unanimous hold)
Inflation: Expected to remain above the 2% target in the short term
Energy prices: High due to Iran conflict and Middle East tensions
Mortgage market: Higher rates on new deals, especially for those switching off fixed rates
Savers: Higher rates, but inflation may erode real returns
What Should You Do Now?
If your fixed-rate mortgage is ending soon: Check current deals immediately. Waiting could increase your costs. Contakt us.
If you plan to buy property: Monitor the market closely – deals are changing rapidly, and rate stability affects affordability.
If you are saving: Compare savings accounts and term deposits to protect against inflation.
Financial advisors emphasize that quick, informed decisions are crucial, as the geopolitical situation remains volatile and could affect mortgage costs and energy prices throughout the summer.
Sources / Further Reading
- Base rate held in light of US‑Iran conflict – Mortgage Solutions
Details on the MPC decision, rationale, and market commentary.
Read more - Base rate hold was ‘best outcome’ but does not erase uncertainty – reaction – Mortgage Solutions
Expert reactions, mortgage market outlook, and forecasts.
Read more - Bank of England MPC holds base rate at 3.75% – Reuters
Confirmation of the MPC decision and context regarding the US-Iran conflict.
Read more - UK interest rate cuts unlikely this year amid Iran war – The Guardian
Impact of Middle East tensions on oil and gas prices and market expectations for UK rates.
Read more - Central banks keep options open as markets bet war will shift policy – Reuters
Global perspective on central bank responses and potential future rate movements.
Read more - Monetary Policy Report – February 2026 – Bank of England
Official report outlining BoE’s 2% inflation target and factors influencing future rate decisions.
Read more - Average mortgage rates breach 5% amid market adjustment – Mortgage Solutions
Data on mortgage market reactions after the outbreak of the US-Iran conflict, including withdrawn offers and rising rates.
Read more
Disclaimer
This article is for information purposes only and does not constitute financial or legal advice. The content provides general information and should not be relied upon as professional guidance.
Always consult qualified professionals before taking financial actions. The author accepts no responsibility for actions taken based on this article.
Risk Warnings
Your home may be repossessed if you do not keep up with repayments on your mortgage.
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