The Bank of England’s Monetary Policy Committee voted today, Thursday 30 April 2026, to hold the Bank Rate at 3.75%, the level it has stood at since December 2025. The decision came in an 8–1 vote, with one member preferring an immediate increase to 4%, and reflects mounting concern at Threadneedle Street that the inflationary impact of the Iran conflict has become significant enough to delay any further easing of monetary policy this year.
Why the Bank held — not cut — rates
Before the outbreak of military conflict involving Iran in late February 2026, the MPC had been expected to deliver two further interest rate cuts during the year, taking Bank Rate to 3.25% by the autumn. That trajectory has been comprehensively disrupted. CPI inflation, which the Bank had projected to fall to around 2% by spring, instead rose to 3.3% in March, up from 3.0% in February — driven primarily by petrol and diesel prices, which recorded their largest single-month increase in over three years. The Bank now expects inflation to drift higher through the second half of 2026, potentially reaching 4% or above if oil and gas markets remain disrupted.
In the accompanying statement, Governor Andrew Bailey emphasised that monetary policy “cannot directly influence global energy prices” but said the MPC was monitoring closely for “second-round effects” — the risk that higher energy costs feed through into wages, services prices and inflation expectations in a way that becomes self-sustaining. The Committee’s communication leaned more hawkish than at any meeting since 2023, with Bailey explicitly stating that the Bank stood ready to consider “forceful” rate increases if those second-round effects materialised.
What it means for mortgages
The hold itself was widely expected and is largely priced into mortgage markets. Of more practical significance to households is the sharp move in swap rates — the wholesale rates that drive the pricing of fixed-rate mortgages — which jumped sharply when the conflict began and have eased only modestly since. The average two-year fixed mortgage rate has risen from 4.83% on 2 March to 5.42% by late April, with the average five-year fix climbing from 4.95% to 5.70%. Major lenders including Nationwide, HSBC, Halifax and Santander have nudged rates lower in the past fortnight as wholesale costs stabilised, but rates remain materially above their pre-conflict levels.
For households remortgaging this year, the practical effect is a noticeably higher monthly payment than would have been likely under a ‘no Iran conflict’ baseline. A £200,000 repayment mortgage on a 25-year term at 5.42% costs around £1,222 a month, compared with roughly £1,156 at 4.83% — a difference of close to £800 a year. Brokers report increased demand for shorter two-year fixes from borrowers hoping rates will fall again before they need to refinance.
Energy bills and the cost of living
The conflict’s impact on inflation is being felt most directly in energy costs. Wholesale natural gas prices have risen sharply, with the disruption of LNG shipping through the Strait of Hormuz adding days of transit time and raising freight costs. Ofgem is widely expected to raise the household energy price cap by between 6% and 9% from 1 July 2026, adding an estimated £100–£140 to the average annual dual-fuel bill. The hike would reverse the falls recorded in the first half of 2025 and pile pressure on already-stretched household budgets.
The political dimension
Chancellor Rachel Reeves, responding to the MPC decision, said the government was “clear-eyed” about the challenges posed by the conflict and would set out measures in the autumn Budget to support households most exposed to higher energy and mortgage costs. The opposition Conservative party criticised the response as inadequate, while Reform UK leader Nigel Farage called for a temporary VAT cut on domestic energy. The Bank’s next interest rate decision is scheduled for Thursday 18 June 2026.
— Sarah Mitchell, London Capital Post
