On June 19, 2025 the Bank of England (BoE) Monetary Policy Committee (MPC) took the decision to hold the base rate of interest at its current level of 4.25%, citing ongoing troubles in the Middle East as a key factor behind the move.
Here we look at why the spiralling conflict influenced this decision and whether it's likely to impact UK mortgage rates going forward.
Why haven’t mortgage rates fallen?
Despite inflation in the UK having fallen significantly in the past 18 months, which led to a reduction in the BoE base rate back in April, the MPC decided to hold fast at their most recent meeting, citing “deeply worrying” conflict in the Middle East as the main reason for their decision.
While many economists still expect further reductions in the base rate later this year, it’s difficult to predict whether the developing conflict overseas could further delay the MPC’s path to the 3.75% bank rate previously anticipated in the industry.
Given that the base rate is a dominant influential factor used by lenders when setting mortgage rates on their deals, most banks have chosen to maintain existing rates, or even slightly increase them, based on the MPC’s decision.
When will rates begin to fall again?
Given that inflation remains above the government target of 2%, and is often pushed up by a surge in oil prices, it’s possible that ongoing conflict could see rates stagnate. The MPC is closely monitoring developments in the Iran/Iraq situation and will continue to do so in preparation for its next meeting on August 7.
As always, global events are difficult to predict, and it’s therefore impossible to know when mortgage rates will fall next. However, the BoE has commented that a softening in the labour market will still likely lead to a gradual fall in interest rates, albeit a slower decline than originally expected.
What could the broader implications be for homeowners?
While it’s difficult to estimate the scale of the impact that Middle Eastern conflict could have on the UK at this early stage, oil prices have already increased significantly. This will likely impact energy prices, and in turn, the prices of goods that require energy to produce, including essentials, such as food.
This could put further financial pressure on households at a time when the cost of living is already stretched for many. Those looking to remortgage may find that their affordability is reduced, leaving them with less competitive rate availability. However, the potential for another increase in property value is also a possibility in a high-inflation environment. If your home should rise in value as a result, you should see an increase in equity. This could balance some of the cost of mortgage interest rates, so it’s important to speak to a broker to ensure you’re getting the best deal for your circumstances.
Should you wait to get a mortgage?
While many prospective first-time buyers will be disappointed to see that mortgage rates remain relatively high, rates are not as high as they have been in recent history. As we’ve seen over the past decade, global events can have a substantial and unavoidable impact on the UK economy, so holding out for the ‘perfect time to buy’ is likely to be a fool's errand.
Mortgage lenders, while influenced by the base rate of interest, do not set the vast majority of their deals solely based on its movement. There are many other factors considered, as well as their impetus to remain competitive within the property market.
Rates could fall further in the latter half of 2025; however, there is also a chance they will rise. If you’re looking to buy a new home or remortgage your existing one, taking advice from a broker with a good understanding of the market will help ensure you don’t pay more than you need to.
