The Bank of England is widely expected to keep interest rates unchanged at 3.75% when the Monetary Policy Committee meets on 18 June 2026. Policymakers continue to navigate a highly uncertain economic environment, with geopolitical tensions in the Middle East still playing a major role in shaping market expectations.
In recent months, interest rate forecasts have shifted dramatically. Earlier in the year, markets were briefly pricing in the possibility of multiple rate hikes as uncertainty around energy prices and inflation increased. However, sentiment has since changed, and by mid-June no further increases are fully priced in for 2026. Despite this, forecasts remain unstable and could change quickly depending on global developments.
Before the latest conflict began, expectations were actually leaning towards interest rate cuts in 2026. The sharp reversal highlights just how sensitive financial markets are to external shocks, particularly those affecting energy supply and inflation pressures.
MPC expected to hold rates steady
Most analysts now expect the Monetary Policy Committee to vote in favour of holding the base rate at 3.75% this week. This view follows comments from senior Bank of England figures, including Governor Andrew Bailey and Deputy Governor Sarah Breeden, who have urged caution due to ongoing inflation risks.
However, the decision is far from unanimous. Within the committee, there are still differing views on the appropriate direction of policy. Chief economist Huw Pill and external member Megan Greene have indicated support for a possible rate increase, while Catherine Mann has suggested she could vote for a hike if energy-related inflation worsens further.
Because of this division, financial markets are likely to focus closely on the voting split, as well as the Bank’s tone in its post-meeting statement. ING economist James Smith expects a 7–2 vote in favour of holding rates, but acknowledges the wider uncertainty surrounding the outlook.
What this means for mortgage rates
Interest rate expectations have a direct impact on mortgage pricing in the UK. Fixed mortgage rates are heavily influenced by swap rates, which reflect market expectations for future interest rate movements. While competition between lenders and wider economic conditions also play a role, swap rates remain one of the most important benchmarks.
When markets expect interest rates to rise, swap rates typically increase as well, pushing mortgage rates higher. On the other hand, when expectations shift towards rate cuts, swap rates tend to fall, allowing lenders to reduce fixed-rate deals.
Following the outbreak of conflict in the Middle East, swap rates rose sharply as markets began pricing in higher inflation and the possibility of future rate increases. This led to a rapid increase in fixed mortgage pricing across the market.
More recently, as expectations have stabilised slightly, swap rates have eased and several lenders have responded by reducing selected fixed-rate products. However, rates remain sensitive to any change in outlook.
Should borrowers fix now or wait?
With uncertainty still high, mortgage experts warn that borrowers should be cautious about trying to time the market. While rates could fall further in the coming months, there is also a risk that they could rise again if inflation pressures return.
For those considering a fixed-rate mortgage, many advisers suggest that securing a deal now may provide more certainty. Most lenders allow borrowers to lock in a rate in advance and switch to a better deal later if pricing improves before completion.
Homeowners already on fixed-rate deals will not see any immediate change in their repayments, even if the Bank of England decides to adjust interest rates in future meetings.
Those whose mortgage deals are due to expire within the next six months may want to review options early. Locking in a rate ahead of time can help protect against volatility in the market while still allowing flexibility to switch if more competitive deals appear.
What economists are predicting
A recent Reuters survey of 65 economists showed unanimous agreement that the Bank of England will hold rates this week. However, views on what happens next are far more divided.
The majority expect rates to remain at 3.75% for the rest of 2026, but a sizeable minority believe at least one rate hike is still possible. Only a small number of economists anticipate a cut by the end of the year.
Forecasts from major institutions vary widely. Some, including Bank of America, believe further rate rises could still happen later in the year if inflation pressures persist. ING also suggests a potential “one-and-done” hike may be possible this summer.
By contrast, Oxford Economics expects rates to remain unchanged well into 2027. Deutsche Bank and Goldman Sachs also forecast no immediate changes, although both acknowledge that rising energy costs could force a shift in stance if inflation accelerates again.
At the more dovish end of the spectrum, some economists argue that weaker economic growth could eventually justify interest rate cuts. Former Bank of England chief economist Andy Haldane has suggested that current economic conditions may support lower rates rather than higher ones.
Why interest rate forecasts remain uncertain
Predicting the direction of interest rates is always challenging, but the current environment makes it even more difficult. Inflation, wage growth, energy prices, and global geopolitical risks all feed into the Bank of England’s decision-making process.
Recent data shows inflation has eased to 2.8%, down from 3.3% the previous month. This decline has been partly driven by lower energy costs, following adjustments to household energy bills. However, economists warn that inflation could rise again later in the year if energy prices remain volatile.
At the same time, UK economic growth forecasts have been downgraded due to global uncertainty and higher costs, adding further complexity to the outlook.
The Organisation for Economic Co-operation and Development has also warned that the UK economy may face weaker-than-expected growth, largely due to its exposure to energy price shocks.
When are the next decisions?
Following the June meeting, the Bank of England has several further Monetary Policy Committee meetings scheduled for 2026, including July, September, November, and December.
Each of these meetings will be closely watched as investors and homeowners look for clearer signals on the future direction of interest rates.
Longer-term outlook
Long-term interest rate forecasts remain highly uncertain. While some projections suggest rates may gradually decline over the coming years, others indicate they could remain higher for longer depending on inflation trends and global developments.
The Office for Budget Responsibility previously suggested a gradual easing path for rates over time, but those forecasts have already been revised in response to changing global conditions.
Ultimately, much will depend on how inflation behaves, how the global economy responds to energy pressures, and whether the Bank of England believes price stability is firmly under control.
Final thoughts
For now, most analysts expect the Bank of England to hold rates steady at 3.75% on 18 June 2026. However, the bigger story lies in the uncertainty that follows.
With economists split on whether rates will rise, fall or remain unchanged, both borrowers and homeowners are being advised to stay cautious and avoid relying too heavily on any single forecast.
The direction of UK interest rates remains highly dependent on global events, meaning the outlook could change quickly in the months ahead.
Download NOW
4 Simple Steps To Becoming Wealthy Through Property