The Bank of England has kept interest rates unchanged at 3.75% as it grapples with rising inflation stemming from the conflict in the Middle East, and a weakening economy.

The Bank’s Monetary Policy Committee cautioned that the conflict leaves global energy costs “highly uncertain” and that inflation – already at 3.3% - is “likely to be higher” later this year.

Financial experts were expecting the news, with most believing it should provide some stability for lenders and borrowers, although there are still fears mortgage rates could creep upwards.

It comes as the latest HMRC property transaction data shows the number of UK residential transactions in March was 101,070, 39% lower than the previous year and 16% higher than in February.

Uncertain

Emily Williams, director of research at Savills, believes the path to lower interest rates now looks increasingly uncertain, pointing to a housing market that will remain highly price‑sensitive. “The true impact on activity is likely to become clearer in the coming months, as mortgage offers agreed prior to the conflict begin to expire and buyers reassess affordability,” she adds.

If policymakers treat the geopolitical backdrop as a risk to monitor rather than a reason to tighten further, that should help anchor expectations that there is no imminent hike, according to Ian Futcher, financial planner at Quilter. “That would support a gradual improvement in mortgage pricing and, in time, transaction volumes. Anything that suggests a hike in the future is likely to feed back into higher swap rates and therefore higher mortgage pricing.”

Rightmove

Meanwhile, Rightmove has reported that the cost of renting a typical home in Great Britain is cheaper than the average monthly mortgage payment for the first time since June 2025 due to higher mortgage rates. The average advertised rent across Great Britain is currently £1,547 - £123 lower than the average new monthly mortgage payment of £1,670.

Scotland and the North East, where asking prices are lowest, are the only areas where a typical new mortgage is still cheaper than renting.

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