Mortgage Rates – What’s Next?

Guessing the future trajectory of UK mortgage rates has become trickier since 6 February.

That was the date the Bank of England cut the base rate to 4.5% but the voting pattern of the nine members of the Monetary Policy Committee (MPC) caused confusion.

The vote was 7-2 in favour of a 0.25% cut but two members voted to reduce by 0.5%. One of the two was Catherine Mann, who had previously been resistant to a cut of any size.

She explained her decision as an attempt to “cut through the noise” of financial market volatility and provide reassurance about the future trajectory of the bank rate.

The noise in question came from the US, where bond markets began the year in jittery mood ahead of Donald Trump’s inauguration due to concerns that included the inflationary risks associated with tariffs.

The 10-year UK government bond yield was pushing 4.9% in mid-January but had fallen close to 4.5% last Friday morning as the early-January nerves settled. As a result, bank rate expectations have lowered in recent weeks, as the chart shows, and headlines about lower mortgage rates have re-appeared.

Last Thursday, financial markets were pricing in a bank rate of 3.88% in December 2025, which compares to 4.32% a month ago.

But Mann’s comments raise questions about how far the Bank of England is going beyond its official remit.
“The Bank of England appear to have forgotten that their job is to get inflation back to 2%, and not to cut Bank Rate in an effort to prop up growth,” said Michael Brown, a senior research strategist at financial broker Pepperstone.

The Office for National Statistics reported UK GDP growth of 0.1% in the final quarter of 2024 last week. However, the increase was largely due to higher government spending, while activity in the private sector shrank.

That said, anyone shopping for a mortgage will care primarily about rates edging below 4% again rather than the historical voting patterns of the MPC. But the reason behind Bank of England decisions matters if you are trying to anticipate what it will do next.