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The Bank of England has held the base interest rate at 3.75%, but has strongly hinted that rate cuts are likely later this year as inflation continues to fall faster than expected.
For anyone thinking about buying, selling, or remortgaging a property in 2026, this is an important signal.
Why rates were held – for now
At its latest meeting, the Bank’s Monetary Policy Committee (MPC) voted 5–4 to keep interest rates unchanged. The close vote shows just how finely balanced things are.
Governor Andrew Bailey cast the deciding vote, explaining that inflation is now expected to fall back to the Bank’s 2% target by the spring, which is good news – but the Bank wants to be confident it stays there before cutting rates further.
In his words, if things continue to move in the right direction, there should be “scope for some further reduction” in interest rates later this year.
When could rates fall?
The tone of the Bank’s statement suggests that the next rate cut could come as early as March or April. Before this announcement, financial markets were already expecting two further cuts during 2026.
That matters because even small reductions in the base rate can influence:
Mortgage interest rates
Monthly repayments
Buyer confidence in the housing market
What’s driving inflation down?
The Bank’s latest forecast shows inflation falling more quickly than previously expected, helped by:
Lower energy bills following changes announced in the last budget
Slower increases in food prices
Energy bill reforms alone are expected to knock around 0.5% off inflation, with the average household saving roughly £150 a year.
The wider economic picture
Alongside falling inflation, the Bank has:
Reduced its growth forecast for the UK economy
Predicted unemployment could rise to 5.3%
This weaker outlook is one of the reasons some committee members believe interest rates should start coming down to support spending and investment.
However, others remain cautious, pointing to ongoing wage growth and the risk that inflation could prove more persistent than expected.
What does this mean for the property market?
From a surveying and homebuying perspective, the key takeaways are:
Mortgage rates may ease later in 2026, improving affordability
Buyer confidence could gradually return as borrowing costs fall
Sellers may see more interest, particularly at realistic asking prices
That said, lower interest rates don’t remove the need for careful due diligence. In a changing market, understanding a property’s condition, risks, and future maintenance costs is just as important as securing a good mortgage deal.
Our view at Ashton Lee Surveyors
If you’re considering a purchase this year, the outlook on interest rates is encouraging – but timing the market perfectly is never guaranteed. What you can control is making sure you fully understand the property you’re buying.
A professional survey can help you:
Avoid unexpected repair costs
Budget accurately for future works
Renegotiate if issues are uncovered
If you’d like to talk through how current market conditions might affect your purchase, feel free to get in touch with Ashton Lee Surveyors – we’re always happy to help.
