The Bank of England has held interest rates at 3.75%—but warned households to brace for fresh pressure as conflict involving Iran drives up global energy costs.
In a rare unanimous decision, all nine policymakers backed the move—signalling caution as inflation risks begin to rise again.
Governor Andrew Bailey said the impact is already being felt.
Fuel prices are climbing - and if tensions continue, higher household energy bills are expected to follow later this year.
The Bank says it is watching closely and “stands ready to act” if inflation drifts further from its 2% target.
Inflation set to climb higher
Hopes of falling inflation have taken a knock:
- Inflation dropped to 3% in January
- It had been expected to fall close to target
- Now it’s forecast to hover around 3% mid-year
- And could hit 3.5% by late summer
Officials say rising gas prices could push up the energy cap set by Ofgem, adding further pressure to household finances.
Mortgage shock: costs surge
Experts say the fallout is already hitting borrowers hard, but those with agreements already in place will be clinging on to them.
Jinesh Vohra, chief executive of Sprive, warned that global instability is feeding directly into mortgage pricing: “The outlook is becoming increasingly uncertain. Lenders are reacting quickly - repricing deals and pulling their most competitive products.”
According to industry data, a new typical mortgage is now £788 a year more expensive than before the Iran crisis escalated - highlighting how quickly markets have shifted.
“Don’t try to time the market”
Vohra urged borrowers not to wait for the “perfect” rate: “It’s incredibly difficult to time the market… it’s often more productive to focus on the things you can control.”
He said small overpayments can make a big difference—cutting interest costs and shortening mortgage terms over time.
The uncertainty is also weighing on firms. Mike Randall of Simply Asset Finance said businesses are struggling to plan: “A volatile global backdrop and unclear rate path are making investment decisions harder.”
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What the Bank of England decision means for you
- Interest rates are on hold—but cuts look less certain
- Mortgage costs have already jumped sharply
- Energy bills could rise again this summer
- Buyers and businesses may delay big decisions
For now, the message from experts is clear: uncertainty is back - and households may need to focus less on predicting the market, and more on staying financially resilient.
