Rates expected to remain at 3.75% for the rest of the year (Andrew Bailey, Governor, Bank of England)
Andrew Bailey has signalled that cutting interest rates is "off the table at the moment", suggesting that borrowing costs are likely to remain elevated for the rest of the year.
Speaking at the European Central Bank's annual conference in Portugal, the Bank of England Governor noted that inflationary pressures stemming from the conflict in the Middle East had shifted the outlook for monetary policy.
"There was an expectation that we would cut rates this year," Governor Bailey said. "That was off the table in March, and it's off the table at the moment."
Bailey had previously indicated he would "tolerate temporarily above-target inflation as part of a return to target." However, inflation remained at 2.8 per cent in the Office for National Statistics' latest release in June 2026 — still well above the Bank's two per cent target.
On the risks ahead, Bailey added: "We're very focused on the risks of pass-through of energy prices to indirect effects, such as food prices and second-round effects.
"We obviously don't want inflation to become embedded."
Some positives for mortgage clients
Tracker Mortgage Deals may remain attractive
- Tracker mortgages may offer a lower initial interest rate and greater flexibility to switch later to a Fixed Rate without Early Repayment Charges
- Whilst a Fixed Rate mortgage provides payment security against potential Bank of England Base Rate increases
- Tracker mortgages can also be an excellent strategy for homeowners planning to sell their property in the near future, as penalty-free Trackers can eliminate the stress of coordinating a sale with the end of a fixed-term contract
- Some mortgage lenders have reduced their Fixed Rate mortgage deals during June, bringing them closer to Tracker offers - presenting a material choice for borrowers
Learn more about how to weigh up whether to choose a Tracker or Fixed Rate mortgage deal.
Reduced housing market demand may trigger improved mortgage rates
Zoopla’s latest house price index reveals a cooling property market. Buyer inquiries over the past four weeks are 15% lower than the same period last year, while agreed sales have dropped by 7%. Currently, three out of five homes listed since January remain unsold.
This trend is mirrored in recent Bank of England data, which shows mortgage approvals fell to 56,200 in May, down from 66,000 in April. This figure sits well below both market expectations and the six-month average of 63,300, marking the lowest level since December 2023.
Industry experts attribute this slowdown to economic and political factors. Richard Donnell, Executive Director at Zoopla, noted: "Higher mortgage rates have hit sales and squeezed affordability for home buyers alongside increased political uncertainty."
In practice, reduced housing market demand does not directly trigger lower mortgage rates. Instead, it typically leads to:
- Increased mortgage availability, as lenders compete more aggressively with rate reductions to attract a shrinking pool of active buyers.
- Restored affordability, with lenders relaxing their affordability criteria to make it easier for certain buyers to access loans
- Price stagnation, as fewer buyers force sellers to reduce their asking prices or withdraw listings entirely
So, for home buyers and remortgage clients, there may be positive mortgage deals and increasing choice. Talk to an experienced broker to evaluate your circumstances and assess which mortgage may be most suitable.
Consider options to reduce your monthly mortgage payments
Cleerly's mortgage experts have identified 12 ways that you could reduce your monthly mortgage payments. Read our in-depth guide to find out more about the following options:
If your current mortgage deal is ending soon...
The UK property market moves quickly, so securing the best rate requires planning ahead. If your Fixed Rate deal expires within the next six months, the Government's Mortgage Charter lets you lock in a new rate today. Reserving a rate now protects you. If better deals become available before your mortgage ends, you can still switch to a cheaper option.
Taking time to assess your financial goals will benefit you long-term. Since lender criteria and product availability change weekly, speaking with an independent mortgage broker is worthwhile. A professional advisor can review the entire market, identify hidden fees, and find a lender that matches your needs.
If your mortgage deal is ending soon, speak with an experienced broker like Cleerly to review your options and secure the right solution. Expert guidance helps you prepare and move forward with confidence, whatever the market brings.