Mortgage Rates Climb in August Despite Bank of England Rate Hold
The Bank of England held interest rates at 3.75% on 30 July 2026, but lenders have begun raising mortgage rates anyway. Experts now warn that further cuts may not arrive until later in 2026.
Expectations of falling mortgage rates have hit a wall. Although the Bank of England's Monetary Policy Committee voted to hold the base rate at 3.75% on 30 July 2026, many high street lenders have simultaneously increased their fixed mortgage rates in early August. This disconnect has caught many borrowers by surprise and has widened the gap between base rate expectations and actual market pricing.
The vote was close: six of nine committee members supported holding, while three pushed for an increase to 4%, signaling ongoing concern about inflation risks. Energy prices, disrupted by geopolitical tensions in the Middle East, remain a drag on the inflation outlook despite CPI falling to 2.6% in June.
Why rates are rising even as base rate holds
Mortgage rates are not set by the base rate alone. Swap rates—the underlying cost at which banks fund mortgages—have risen despite the stable base rate. Market expectations of further rate cuts this year have cooled, and some financial institutions are hedging against renewed inflation from energy cost pressures. This means lenders are passing costs to borrowers, and anyone considering remortgaging should act quickly if rates are currently favourable.
Implications for expat homebuyers
If you're planning to buy property in the UK, the expectation of a steady or rising rate environment should inform your decision. First-time buyers and expats coming from lower-rate markets abroad will find UK mortgages expensive: standard variable rates hover just below 7.35%. Fixed-rate deals may offer better protection, but the window for rate cuts appears to be narrowing. Lock in a fixed rate if you can, and budget for the possibility that rates could stay elevated through the remainder of 2026.
Sources
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