A cut to the base rate was narrowly missed, as four of the Monetary Policy Committee’s (MPC’s) members voted to lower rates, while five chose to maintain them.
David Hollingworth, associate director at L&C Mortgages, said although the base rate was cut in December, the committee’s tone was “cautious” regarding inflation, meaning this month’s hold was “widely anticipated” and should not cause “any turbulence for mortgage rates”.
“There is still a broad expectation that interest rates will fall further through the course of this year, which is already broadly priced into fixed rates,” he added.
He said the fact that four members of the MPC voted to cut the base rate should be received positively and taken as a sign that “another cut will be applied in coming months, with potential for more as the data firms up to support more reductions”.
However, Hollingworth said borrowers should not be complacent, as lenders had already put mortgage rates up in response to swap rates.
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Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, agreed that the vote was a “close call” with “clear signals that further rate cuts are imminent”.
She said mortgage affordability was improving and the six base rate cuts since 2024, along with a relaxed lending environment and slower house price growth, had “helped to ease the affordability pressure for some – but expect a few bumps along the way”.
Haine added: “Some major high street lenders have upped mortgage rates in recent weeks in response to shifting interest rate expectations, though borrowers must remind themselves that they are in a much better place than they were in 2023, when the average two- and five-year fixed rate deals sat comfortably above the 6% mark.”
Lenders will be disciplined
Emma Hollingworth, chief distribution officer at LSL Financial Services, said mortgage rates were unlikely to move much lower, if at all, in the near term.
She added: “In fact, recent increases in swap rates have caused some lenders to put up their mortgage rates.
“That said, competition remains strong and pricing remains relatively attractive, which is good news for the estimated 1.8 million borrowers rolling off fixed rate mortgages in 2026.”
Charles Resnick, chief finance officer at Afin Bank, said the MPC members had little appetite to loosen policy again, “so the voting at each meeting will continue to be close”.
“I expect lenders to remain disciplined with their mortgage rates, given the uncertainty over the timing of the next cut and the MPC’s more cautious approach to returning inflation sustainably to its 2% target,” Resnick added.
Adrian Moloney, group lending distribution director at Precise, said: “While many borrowers will have been hoping for an interest rate reduction, a period of stability should at least provide some reassurance and help households plan with greater confidence.
“Despite the base rate remaining unchanged, there is good news on affordability – with positive movement on mortgage rates and more flexible products coming to market, to help more homebuyers and movers make the leap this year.”
Lower mortgage rates could still be on the way
Peter Stimson, director of mortgages at MPowered, said the year started “frantically”, with “some lenders cutting their fixed rate deals so low that they were essentially selling mortgages at cost”.
He said such aggressive pricing put loans at or near swap rates and were usually done to “grab headlines and market share”.
Stimson said rates had started to “creep up” in the last couple of weeks, but the voting pattern of the latest base rate “could give lower rates a new lease of life”.
He added: “The fact that nearly half of the Monetary Policy Committee voted for an immediate rate cut implies there’s a distinct possibility that a cut could come the next time they meet in March.
“This means that a fall in swap rates, which lenders use to determine the fixed rates they offer to customers, could come in the coming days. Competition is still intense amongst lenders, and this, combined with falling funding costs, could be great news for borrowers in the days ahead.”
Lorna Hopes, mortgage specialist at Smith and Pinching, said: “No one was expecting a change in the rate today, but the fact that four members of the committee voted for an immediate rate cut suggests that a cut could be coming sooner than thought.”
She backed up Stimson’s point that lenders tended to enter the new year with lower rates to grab market share, adding: “That competition could now continue, and this is great news for existing homeowners who are due to remortgage in coming months, and for renters who’ve decided that 2026 is the year to take the plunge and buy their first home.”
