Latest UK Interest Rate Forecasts: Will the Bank of England cut interest rates on 30 July 2026?

Latest UK interest rate forecasts and news

• The Bank of England Monetary Policy Committee held interest rates at 3.75% at its 18 June meeting. The move was widely predicted following the US-Iran peace deal and inflation figures for May that were lower than expected.
• Interest rate forecasts have swung wildly since the outbreak of the conflict, with markets pricing in as many as four interest rate hikes this year in March at the height of the uncertainty.
• As of 17 June, traders were pricing in one interest rate hike this year, although the outlook remains highly uncertain. Before the conflict broke out, two interest rates cuts were expected in 2026.
• The MPC’s decision to hold interest rates at 3.75% was widely predicted after senior officials led by Bank of England governor Andrew Bailey and deputy governor Sarah Breeden called for the bank to tread carefully before acting on rising inflation risks.
• However, division remains within the MPC: chief economist Huw Pill and external member Megan Greene have signalled they will vote for an immediate rate rise.

What UK interest rate forecasts mean for your mortgage

What markets expect to happen to interest rates has a direct impact on fixed-rate mortgage pricing. Swap rates – which reflect market expectations for future interest rates – are the primary benchmark for pricing fixed-rate mortgages in the UK, although other factors such as competition also play a role.

If swap rates rise because markets expect higher interest rates, lenders typically increase mortgage rates. Conversely, falling swap rates can lead to cheaper fixed-rate mortgage deals. 

Swap rates rose sharply following the outbreak of the Middle East conflict, as predictions of interest rate cuts in 2026 gave way to forecasts of rate increases instead. This led to a rapid increase in fixed mortgage rates. As predictions have eased, swap rates have fallen back, and many lenders have started trimming mortgage rates.

Experts say that while mortgage rates may fall further, given the uncertain outlook, those keen to secure a fixed rate mortgage should consider locking in a rate now, rather than holding off in the hope of further falls. This will protect against the risk of rates climbing further and borrowers can keep the rate under review in case a better deal appears before they need to switch.

What should you do if you have a mortgage?

• On a fixed rate? Your payments won’t change until your deal ends, even if interest rates rise or fall.
• Remortgaging soon? If your current deal ends in the next six months, consider locking in a rate now to protect against the risk of mortgage rates rising further. You can then keep the rate under review.

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Expert view on interest rate forecasts and mortgages

“The more important story for borrowers is that mortgage rates have already been edging down, with major lenders including Nationwide, HSBC, NatWest and TSB reducing selected fixed-rate deals in recent weeks as competition for customers heats up. NatWest, for example, cut rates by up to 0.15 percentage points last week, while a growing number of lenders are now offering sub-4% fixed-rate mortgages for borrowers with larger deposits.

“If you’re one of the 1.8 million homeowners due to remortgage this year, don’t put off reviewing your options. Mortgage rates are driven by expectations of where markets are heading, not just a single day’s decision. Locking in a deal now can provide certainty, so you avoid the impact of any rate rise, while still being able to switch to a cheaper rate if rates fall further before completion.”

Economists’ UK interest rate forecasts

Interest rate predictions are notoriously difficult at the best of times, but the complexity of the current situation in the Middle East makes it even harder.

A Reuters poll of 65 economists found while a majority expected rates to remain at 3.75% for the rest of the year, nearly 40% of respondents predicted at least one hike and only six expected a quarter point cut by the end of the year.

Here are a selection economists’ UK interest rate forecasts for 2026.

1. Forecasts that interest rates could rise

• Bank of America economists Sonali Punhani and Ruben Segura-Cayuela argue multiple rate hikes are still on the table, likely in July and September. They expect a pause at Thursday’s MPC meeting.
• ING’s James Smith said: “We’re pencilling in a one-and-done rate rise this summer.”

2. Forecasts that interest rates may stay the same

• Oxford Economics believes that the Bank of England will hold interest rates at their current level for the rest of 2026 and “well into 2027”.
• Pantheon Macroeconomics’ chief economist Rob Wood said: “There will be another consumer prices index as well as other economic releases before the July decision, but the drop in oil prices after the US-Iran agreed an extended ceasefire had in any case led us to remove our forecast for a rate hike. We now expect Bank Rate on hold through end-2027.”
• Deutsche Bank’s Sanjay Raja said: “We stick to our call for no change in Bank Rate this year. But ​the odds of a rate rise are increasing, in our view. The duration of the energy shock is ​becoming non-negligible.”
• Goldman Sachs said it still expects interest rates left unchanged this year, even if a new leader emerges for Labour. “That said, we see a low hurdle for the BoE to deliver a couple of hikes during the summer if energy price pressures continue to build,” it added.

3. Forecasts that interest rates may go down

• Former chief economist of the Bank of England Andy Haldane said: “For now, growth in the economy calls for lower interest rates, not higher ones.”

However, what happens with interest rates in 2026 will depend on numerous factors. You can keep up to date by bookmarking our guide to best mortgage rates in the UK or signing up to our weekly newsletter.

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Why did the Bank of England hold interest rates on 30 April 2026?

• The Bank held interest rates at 3.75% on 30 April, with the MPC voting 8-1 in favour of holding rates, with one member voting to increase rates to 4%.
• In its deliberations and forecast, the MPC sent the message that higher inflation is on the way and higher rates are likely this year. It warned that up to six rises could be possible, taking interest rates up to 5.25%, in a worst case scenario.
• However, a month later on 29 May, Bank of England governor Andrew Bailey said the bank is in no rush to raise interest rates while the outcome of the Iran war remains uncertain and the UK’s growth rate stays weak.
• In a signal that interest rates will remain at 3.75% at least during the summer, he said it was tolerable for inflation to stay above the Bank’s 2% target during the current crisis but that would change if a more permanent increase in prices began to take effect.

“Given the context of softness in the real economy and uncertainty around the scale and duration of the shock, tolerating temporarily above-target inflation to provide some support for the real economy is an appropriate way to approach the trade-off [between inflation and activity],” Bailey said. “But that tolerance would weaken if signs of second-round effects begin to emerge.”

When did the Bank of England last make an interest rate cut?

• The Bank of England last cut UK interest rates in December 2025 to their lowest level in almost three years, marking the sixth interest rate cut since rates peaked in 2024, in an attempt to stimulate the economy.

When will UK mortgage rates come down?

Experts previously expected mortgage rates would gently trend down over 2026. However, the outlook has become more uncertain following the conflict in the Middle East, which has pushed up energy prices and could result in interest rates rising.

This unpredictable outlook comes as little surprise to the UK public. In our 2026 research, we found that around a quarter of Brits expect rates to rise (23%) and a similar proportion think they will fall (25%), while 28% expect them to stay the same and 24% are unsure.

But there are many factors at play, which makes an accurate mortgage rate forecast difficult to make. Read more in our guide on Mortgage rate predictions.

What are interest rates and why do they change?

• The Bank of England’s base rate acts as a benchmark for the cost of borrowing money. As a general rule, when interest rates increase, so does the cost of borrowing on mortgages and other types of borrowing.
• One major reason why the Bank moves rates up and down is to help control inflation. When inflation is high, the Bank may increase interest rates to try to bring it down by encouraging people to spend less and reduce demand. And once inflation is at or near its target, the Bank may hold or cut interest rates.
• However, the Bank’s Monetary Policy Committee will assess a range of factors when deciding whether to cut interest rates including job and wages data and external factors that can impact the economy.

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What’s happening with the UK inflation rate?

• The latest official data, released in May 2026, showed the UK inflation rate (measured by CPI) unexpectedly remained at 2.8% in May, with higher transport costs offset by slower food price rises.
• CPIH, which includes owner‑occupiers’ housing costs, remained at 3%, while RPI inflation came in at 3.1%, up from 3%.
• The Organisation for Economic Co-operation and Development expects the headline rate of inflation in the UK to rise to 4% this year, the second-highest in the G7 after the United States – highlighting how exposed the UK is to rising energy prices.
• It also believes the UK faces the biggest hit to growth from the conflict among the G20 advanced economies. It now forecasts the UK economy will expand by just 0.7% in 2026 – down from a previous projection of 1.2% – the largest downgrade in its updated outlook, released this morning.

When is the Bank of England’s next Monetary Policy Committee meeting?

Key Bank of England interest rate decision dates:

• 30 July 2026
• 17 September 2026
• 5 November 2026
• 17 December 2026 

The Bank of England publishes a calendar of future committee meeting dates here.

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UK interest rate forecast for the next 2, 3 and 5 years

Many people want to know the UK interest rate forecast for the next 5 years. However, long-term UK interest rate forecasts should be treated with caution. The Office for Budget Responsibility (OBR) bases its forecasts on market expectations for future interest rates, but these expectations can change significantly as economic conditions evolve.

For example, in its Economic and Fiscal Outlook published in March 2026, its UK interest rate forecast was that rates would continue to fall in 2026, before rising to around 4% in 2031. However, interest rate forecasts have changed significantly since March due to the conflict in the Middle East.

The UK interest rate forecast for the next 2 years and the next 3 years remain particularly uncertain given ongoing inflation risks, economic conditions and geopolitical events.

What does ‘terminal rate’ mean?

The terminal rate for the Bank of England refers to the peak or final level of the Bank Rate in a specific interest rate cycle, reflecting the highest (or lowest, in a cutting cycle) point the central bank brings rates to before holding or reversing.

Interest rate changes’ impact on credit cards and loans

Other types of borrowing are affected in a similar way. If interest rates go up, borrowing of any type generally gets more expensive, while when interest rates are cut, borrowing generally gets cheaper. However, this is in general terms as the amount you’ll pay on things like credit cards and loans will depend on a number of factors including your credit history.

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