Rate Cuts Were the Story All Year — Now a Hike Is Back on the Table

For most of this year, the mortgage conversation I've been having with clients has followed a predictable script: base rate held, fixed rates slowly drifting down, everyone quietly hoping for a cut before Christmas. This week, that script got a rewrite. Dig into the minutes from the Bank of England's last meeting and you'll find something that hasn't shown up in a while — a genuine, credible case for the next move being up, not down. If you're due to fix in the next few months, that changes the calculation.

Where things stand right now

The base rate is holding at 3.75%, where it's sat since last December, most recently confirmed at the 18 June MPC meeting. The next decision lands on 30 July, alongside a fresh Monetary Policy Report. On the mortgage side, the price war among lenders is still running: the average 2-year fix is around 5.68%, the average 5-year fix 5.63%, and standard variable rate a painful 7.13%. The sharpest deals on the market right now sit well below those averages — 4.33% on a 5-year fix, 4.35% on a 2-year, and trackers from around 4.09% at 60% loan-to-value.

The two votes that changed the tone

The June decision was a 7-2 vote to hold. That sounds decisive, but the two dissenters — Megan Greene and Huw Pill — didn't vote to cut, they voted to raise the rate to 4.00%. That's the first hawkish dissent of any real weight in a long while, and it's landed at an awkward moment: headline inflation is sitting at 2.8%, but services inflation — the number the MPC watches most closely for homegrown price pressure — has climbed to 3.7%. Economists at Bank of America have flagged both July and September as live hike risk. A Reuters poll of 65 economists still points to most expecting a hold through the rest of the year, but nearly 40% now pencil in at least one hike, against just six who expect a cut.

So why are fixed rates still falling?

Good question, and one I get asked a lot. Fixed mortgage rates aren't priced directly off the base rate — they're priced off swap rates, which reflect where lenders think rates are heading over the life of the deal, plus how hungry each lender currently is for new lending. Right now several big names are fighting hard for market share, which is why we've seen a genuine price war even as the rate-hike chatter has grown louder in the background. That's good news for borrowers today, but it's worth being clear-eyed: this pricing window reflects competition, not certainty, and it can close as quickly as it opened.

What this means if you're fixing soon

A few practical steps I'd suggest if you've got a fix due to end this year:

1. Don't wait and hope for a cut. Get your options in front of a broker now — most lenders let you lock a rate up to six months before your current deal ends, with no obligation to take it if something better appears.
2. Ask about rate lock or reservation products. Several lenders now offer the ability to secure today's pricing while keeping the option to switch down if rates fall further before completion.
3. Weigh tracker versus fixed with the hike risk actually priced in, not just today's headline number. A tracker that looks cheap now could cost more within a year if the MPC does move.
4. If you're a first-time buyer with a mortgage in principle already in place, don't let it lapse. Reapplying from scratch in a shifting rate environment can mean starting your affordability sums all over again.

My honest take

I still think a hold is the more likely outcome on 30 July — the vote split and the inflation picture aren't quite there yet for a majority to swing behind a hike. But "more likely" isn't the same as "certain", and for the first time this year it's genuinely no longer a one-way bet on cuts. That's exactly the kind of environment where I'd rather see a client lock in a competitive rate today than gamble on a cut that may simply not turn up. If you're within six months of remortgaging, or you're a buyer trying to work out whether to fix or track, get in touch — it costs nothing to have the conversation, and the numbers change often enough that it's worth checking in even if we spoke a few months ago.

Kindest regards

Ian

Ian A Moore CeMAP — Director, IM Mortgage Consultancy Limited

Your home may be repossessed if you do not keep up repayments on your mortgage. IM Mortgage Consultancy Limited is authorised and regulated by the Financial Conduct Authority. This article is for general information only and does not constitute mortgage advice; rates and figures quoted were accurate at the time of writing and are subject to change.