The Bank of England is expected to hold its base rate at 3.75% today, though the decision comes amid heightened uncertainty over inflation and rising pressure on the Monetary Policy Committee (MPC) to act.
At the start of 2026, markets had anticipated a series of interest rate cuts. However, the outbreak of the Iran war has shifted expectations, with higher energy costs linked to the conflict pushing up inflation forecasts and prompting a reassessment of monetary policy.
Following the Bank’s 19 March meeting, where rates were held, governor Andrew Bailey stated the institution “stands ready” to respond to inflation pressures. Other MPC members signalled that rates could remain elevated for longer or rise if required. Market futures briefly priced in multiple rate increases this year before moderating in subsequent weeks.
Market expectations and split vote
While most analysts expect the Bank to hold rates today, the vote split among MPC members is likely to be closely watched. Last month’s decision was unanimous, but this time the vote could be more divided, reflecting rising inflation risks and stronger-than-expected business activity.
Nicholas Mendes, head of marketing at John Charcol, said: “A split vote looks likely, and in some ways the vote split may matter almost as much as the headline decision itself.”
He noted that markets are already pricing in a higher rate environment, with two, three and five-year SONIA swaps sitting around 4.18% to 4.21%. The forward curve points to 3-month SONIA moving higher over the coming months rather than falling back quickly.
Implications for property investors
The rate outlook carries significant implications for property investors and borrowers. Mendes cautioned that even if the Bank holds rates, borrowers should not interpret this as a signal that mortgage rates will fall.
“A tight hold, for example a 5-4 vote, would still be a hawkish hold. It would tell the market that the Bank is only one vote away from raising rates, and that is not the sort of backdrop that usually gives lenders the confidence to cut aggressively,” he said.
The uncertain rate environment adds to challenges facing property investors, who are already navigating upcoming tax changes and shifting mortgage conditions in the buy-to-let sector.
Mendes suggested that a rate rise this week should not be ruled out. “If the MPC accepts that rates are likely to have to move higher, there is a case for acting now rather than waiting until the next meeting on 18 June. Waiting another seven weeks risks allowing further inflation pressure to build and could increase the chance of a larger move being needed later,” he said.
The Bank’s decision today will provide clarity on the near-term direction of monetary policy, though the vote split and accompanying guidance may prove as significant as the headline rate decision itself for property market participants assessing borrowing costs.
