Expectations of an early spring interest rate cut have faded as geopolitical tensions and rising energy prices cloud the outlook while new research suggests homeowners remain deeply divided over where mortgage rates are heading over the next year.
Markets had widely anticipated that the Bank of England could begin reducing rates in March, but recent global instability has increased inflationary pressure, making an immediate cut less likely.
Rising energy costs in particular are seen as a risk to the inflation outlook, which the Bank must keep under control before loosening monetary policy.
Higher borrowing costs continue to weigh on household finances. Mortgage payments remain significantly above pre-2022 levels following the sharp rate rises seen between 2022 and 2024, and lenders have warned that any delay to rate reductions could prolong pressure on affordability for both homeowners and buyers.
MIXED EXPECTATIONS
At the same time, new consumer research highlights how uncertain the outlook feels to households. With inflation still above the Bank of England’s 2% target and global events continuing to affect financial markets, expectations for mortgage rates are increasingly mixed.
Paul Heywood, Chief Data & Analytics Officer at Equifax UK, says: “Just weeks ago, a Bank of England rate cut was widely anticipated for March but escalating geopolitical tensions and the swift impact on energy prices have drastically changed the picture.
“A March reduction is now effectively off the table and UK households just starting to feel the respite of lower borrowing costs may have to manage current costs for longer.
“With average mortgage costs already over £250 higher than in January 2022, and now the looming prospect of higher energy bills after July, many household budgets will be feeling the pinch.”
EVEN SPLIT
Meanwhile research from HomeOwners Alliance shows homeowners are almost evenly split on where mortgage rates will go over the next 12 months, with 23% expecting them to rise and 25% believing they will fall.
First-time buyers are notably more pessimistic, with 47% expecting rates to increase and only 13% predicting a fall, underlining the cautious mood among those trying to enter the market.
BREATHING SPACE
Paula Higgins (main picture, inset), CEO of HomeOwners Alliance, says: “If the Bank holds rates it will give homeowners some breathing space, but the reality is many households are already feeling deeply uncertain about where mortgages are heading.
“Our research conducted in February – before the latest escalation in global tensions – already showed homeowners were almost evenly split on whether mortgage rates would rise or fall, which underlines just how divided and unsure people were even before events in the wider world added more volatility.
“That uncertainty often leads to inertia, with homeowners waiting to see if rates improve.”
The HomeOwners Alliance research was conducted by Opinium in February 2026 among 2,000 UK adults, including more than 1,200 homeowners and over 500 aspiring buyers.
