With the Bank of England widely expected to freeze the base rate at 3.75% this Thursday, many borrowers are left wondering why a sharp drop in CPI inflation (down to 2.8% in April) isn’t translating into immediate relief.
The reality is that recent drops in fixed mortgage rates are incredibly fragile, and markets are already pricing in the risk of renewed inflationary pressures later in 2026 due to ongoing Middle East tensions.
Tim Grimsditch, Managing Director of Unbiased, said: “We expect the base rate to remain frozen at 3.75% when the Bank of England announces its decision on Thursday.
“The Bank of England is facing a difficult balancing act. On one hand, the latest ONS figures show CPI inflation fell more sharply than expected to 2.8% in April, down from 3.3% in March. On the other hand, ongoing conflict in the Middle East risks renewed inflationary pressure later this year.
“There is some relief filtering through for borrowers. After swap rates surged amid the conflict in the Middle East earlier this year, several major lenders have cut fixed rates again in recent weeks. But the improvement is fragile: swap rates remain well above their pre-conflict levels, and with markets still pricing the possibility of higher rates later in 2026, today’s cheaper deals could prove short-lived. Borrowers hoping for a settled, steadily falling market may be disappointed.
“However, whether the Bank of England holds, cuts, or eventually raises rates again, the message for consumers is not to put off improving their financial position. The question is not what the Monetary Policy Committee decides on Thursday, but whether your savings, mortgage and investment plans are robust enough to withstand the next five, 10 or 20 years of economic uncertainty.
“It’s understandable to feel unsettled by a market that delivers positive inflation news one week and shifting borrowing costs the next. However, making knee-jerk financial decisions can be damaging to long-term wealth. Financial security comes from looking beyond short-term market movements and building a clear, long-term strategy. For those looking to take greater control of their financial future, speaking with a financial adviser can put you at ease.”
