Economists Expect Bank of England to Hold Rates Despite Inflation Risks
Economists expect the Bank of England to keep interest rates on hold for the rest of 2026, leaving mortgage borrowers facing a longer period of rate uncertainty rather than a quick return to lower borrowing costs.
A Reuters poll published on 18 August 2026 found that a strong majority of economists expect Bank Rate to remain at 3.75% through the remainder of the year. The forecast reflects a difficult backdrop for the Bank of England, with inflation risks still present and the mortgage market already adjusting to higher funding costs.
For homebuyers and remortgagers, the message is not that mortgage rates cannot move. Fixed mortgage pricing can still change even when Bank Rate stays the same, because lenders also respond to swap rates, competition, inflation expectations and funding costs. But the poll suggests borrowers should be careful about assuming that a wave of Bank Rate cuts will quickly improve affordability.
Why the Bank of England may stay cautious
The Bank of England is still trying to balance inflation pressure against signs of strain in the wider economy. If rates stay too high for too long, borrowing becomes harder and household spending can weaken. If rates are cut too quickly, inflation could become harder to control.
That balancing act matters directly to mortgage borrowers. Bank Rate influences tracker mortgages and standard variable rates more directly, while fixed-rate mortgages are usually priced around wider market expectations. When economists expect Bank Rate to remain on hold, lenders may be less likely to price products as though sharp cuts are just around the corner.
For borrowers, that means affordability should be tested against the mortgage deals available now, not just hoped-for lower rates later.
For more detail, read how mortgage rates actually work.
What this means for mortgage borrowers
A hold at 3.75% would not affect every borrower in the same way. Someone on a fixed-rate mortgage may see no immediate change to their monthly payment. Someone on a tracker mortgage may be more directly exposed to future Bank Rate decisions. Someone on a standard variable rate may depend on how their lender chooses to price its own rate.
The biggest impact is often psychological as much as mathematical. When borrowers expect rates to fall soon, they may delay decisions, choose tracker products, or stretch affordability on the assumption that monthly payments will ease later. If the Bank of England stays on hold for longer, that strategy becomes riskier.
Borrowers coming to the end of a fixed deal may need to compare options earlier, especially if their current rate is much lower than the deals available now. Waiting for a rate cut may make sense for some people, but it can also leave others drifting onto a higher follow-on rate.
For more detail, read what happens at the end of a fixed-rate mortgage?
Fixed-rate borrowers still need to watch the market
A Bank Rate hold does not automatically mean fixed mortgage rates will stay still. Fixed rates are influenced by what financial markets expect to happen in the future, not just by today’s Bank Rate.
If markets believe inflation will remain stubborn, fixed-rate pricing can rise even if Bank Rate does not move. If markets become more confident that inflation is cooling, fixed rates may ease before the Bank of England actually cuts.
That is why borrowers should avoid treating the Bank Rate decision as the only mortgage-rate signal. It is important, but it is not the whole story.
For buyers comparing products, the choice between a two-year fix, five-year fix, tracker or variable option should depend on affordability, risk tolerance, future plans and the cost of changing product later.
For more detail, read fixed vs variable mortgages: which is better right now?
Tracker borrowers face a different question
Tracker mortgages can become more attractive when borrowers expect rates to fall, because the rate usually moves in line with a benchmark such as Bank Rate plus a lender margin. But if Bank Rate remains unchanged for longer than expected, the benefit may take longer to appear.
A tracker may still suit some borrowers, especially those who value flexibility or want to avoid being locked into a fixed product. But it is not a one-way bet. Payments can remain higher for longer, and they can rise if Bank Rate increases.
The key question is whether the borrower could still afford the mortgage if expected cuts do not arrive. If the answer is no, a tracker may be too much risk.
For more detail, read tracker vs fixed-rate mortgages: which is better?
Inflation remains the central problem
The reason economists are cautious is inflation. If inflation remains above the Bank of England’s target or looks likely to rise again, the Bank may be reluctant to cut interest rates.
For mortgage borrowers, that creates a frustrating environment. Household costs may already feel high, but borrowing costs may not fall quickly enough to offer relief. That can affect buyers, homeowners, landlords and people looking to remortgage.
Affordability checks are also shaped by this environment. Lenders do not simply ask whether a payment looks manageable today. They may also consider whether the borrowing remains sensible if rates or household costs become less favourable.
For more detail, read how mortgage affordability is calculated by lenders.
Buyers should avoid building plans around hoped-for cuts
The Reuters poll does not mean rates definitely will not fall. Forecasts can change, especially if inflation, jobs data or economic growth shift sharply. But it does show that borrowers should be careful about relying on a best-case scenario.
A buyer who can only afford a property if mortgage rates fall soon may be taking on a fragile position. If rates stay higher for longer, the monthly payment could remain uncomfortable, borrowing power could be lower, and the available property budget may need to be adjusted.
That does not mean buyers should stop moving. It means they should work from realistic numbers.
A Mortgage in Principle can help buyers understand what a lender may be prepared to consider, but it should still be treated as an early indication rather than a guarantee.
For more detail, read why a Mortgage in Principle matters when house hunting.
Remortgagers may need to act earlier
The rate outlook is especially important for remortgagers. Many borrowers still coming off older fixed-rate deals may face a jump in monthly payments when their current product ends.
If economists are right and Bank Rate stays at 3.75% for the rest of the year, some homeowners may decide to secure a new deal rather than wait. Others may choose a product transfer, tracker, shorter fix or longer fix depending on their plans and risk tolerance.
The right option depends on the borrower’s current rate, remaining term, equity position, income, credit profile and whether they may move home soon. The lowest headline rate is not always the best answer if fees, early repayment charges or future flexibility do not fit.
For more detail, read how remortgaging can save you money.
Practical steps for borrowers
Borrowers should not panic because economists expect rates to stay on hold. A stable Bank Rate can still give the market time to adjust, and mortgage pricing can change even without an MPC rate cut.
The practical approach is to review affordability carefully, compare fixed and variable options, understand what happens when a current deal ends, and avoid assuming that future rate cuts will rescue a stretched budget.
Anyone applying soon should check their deposit, loan-to-value, debts, credit profile and monthly commitments before making a full application. For borrowers near the edge of affordability, lender choice can make a major difference.
For more detail, read what factors affect how much you can borrow for a mortgage?
Source
Bottom line
Economists expect the Bank of England to keep interest rates on hold for the rest of 2026, which means mortgage borrowers may not get quick relief from lower Bank Rate decisions.
That does not mean every mortgage rate will stay unchanged, but it does mean buyers and remortgagers should make decisions using realistic current figures rather than relying on hoped-for cuts.
For fixed-rate borrowers, the key issue is when the current deal ends. For tracker borrowers, the question is whether payments remain affordable if Bank Rate does not fall. For buyers, the priority is making sure the purchase budget still works if mortgage costs remain higher for longer.
The safest approach is to compare options carefully, test affordability properly and avoid building a mortgage plan around optimism alone.
👉 Check your mortgage options before deciding whether to fix, track or wait.
