Latest UK Interest Rate Forecasts: Will the Bank of England cut interest rates on 17 September?

Latest UK interest rate forecasts and news

• The Bank of England held interest rates at 3.75% on 30 July 2026, for a fifth consecutive meeting, in a move that was widely expected.
• The Monetary Policy Committee voted 6-3 to hold Bank Rate. Huw Pill, Megan Greene and Catherine Mann voted to increase it to 4%, reflecting growing concern that higher energy prices could lead to more persistent inflation.
• However, the outlook remains highly uncertain. Inflation fell more than expected to 2.6% in June, but volatile energy prices and continued uncertainty in the Middle East could put renewed upward pressure on inflation.
• Analysts described the decision as a “hawkish hold” because support for a rate rise increased from two members to three. However, Governor Andrew Bailey did not signal that an increase was imminent.
• Interest rate expectations have shifted sharply since the conflict in the Middle East began. Before it started, markets expected two rate cuts in 2026, but they have since considered the possibility of rate rises.
• Attention will now turn to the Bank’s next decision on 17 September.

What UK interest rate forecasts mean for your mortgage

What markets expect to happen to interest rates has a direct impact on future 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 eased, swap rates fell back, and many lenders cut mortgage rates.

However, renewed hostilities in July 2026 pushed rate expectations and fixed mortgage rates higher again. While the subsequent fall in oil prices may ease some pressure, mortgage pricing remains volatile.

Given the uncertain outlook, those keen to secure a fixed rate mortgage should consider locking in a rate now. 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.
• On a tracker mortgage? If your deal directly tracks Bank Rate, today’s decision means your rate should remain unchanged, although you should check your mortgage terms.
• 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

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.

Analysts broadly expect the Bank to remain cautious. Many expect Bank Rate to stay at 3.75% for the rest of 2026, although the latest 6-3 vote shows that the risk of an increase has grown.

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

• Bank of America expects the Bank of England to keep interest rates unchanged this year.
• ING’s James Smith said: “Ongoing weakness in private sector hiring and wage growth bolsters our call for the Bank of England to keep rates on hold this year, unless things get materially worse in the energy market.”
• 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”.
• 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.”

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 July 2026?

• The Bank of England held Bank Rate at 3.75% on 30 July 2026, with the Monetary Policy Committee voting 6-3 to maintain the rate.
• Six members concluded that holding rates was appropriate because wage growth and economic activity were weakening and there was not yet enough evidence that higher energy costs were feeding into wider inflation.
• Huw Pill, Megan Greene and Catherine Mann voted to increase Bank Rate to 4%. They were concerned that higher energy prices could lead businesses to raise prices and workers to seek higher wages, making inflation more persistent.
• Inflation fell to 2.6% in June, but the Bank remains concerned that volatile oil and gas prices could push it higher again.

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.

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?

• Figures released by the Office for National Statistics on 22 July showed that UK CPI inflation fell more than expected to a 15-month low of 2.6% in June, down from May’s 2.8% reading and the 2.7% forecast by economists in a Reuters survey. June’s decline was driven by a drop in petrol prices, as well as lower food and clothing costs, the ONS said.
• However, this respite may not last, as higher energy prices could push inflation up again. Oil prices have fallen back in recent days as hopes of peace talks have grown, but they remain volatile and above their levels at the start of July.
• CPIH, which includes owner‑occupiers’ housing costs, fell to 2.8%, down from 3%, while RPI inflation came in at 3%, down from 3.1%.

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

Key Bank of England interest rate decision dates:

• 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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