In times of higher or rising inflation, the Bank of England is unlikely to cut interest rates

Mortgage borrowers are unlikely to see an interest rate cut in March as experts believe the Bank of England will take a cautious stance due to the continuing war in the Middle East.

Before the events in Iran began it had been predicted the Bank would cut rates on 19 March to 3.5% as inflation dropped to 3%.

But with the war escalating oil has risen above $100 a barrel, and this is likely to push up energy prices and create higher fuel costs– something which will also drive up inflation.

In times of higher or rising inflation, the Bank of England is unlikely to cut interest rates.

Ben Perks, managing director at Stourbridge-based Orchard Financial Advisers, explained to the Newspage agency: When Trump dropped his first bomb on Iran, it blew up all hope of a rate reduction this month. A few weeks ago, a cut to base rate looked nailed on.

But the ever-cautious committee will look at global events and hold fire. An increase at this stage would be unjustified, but we will wait and see what happens to inflation as energy prices look to soar, he added.

Meanwhile, Mike Staton, director at Mansfield-based Staton Mortgages, offered reassurance, via Newspage, there would not be a rate hike from the Bank of England.

Yes, inflation is likely to tick up again with energy and fuel prices rising due to global conflict, he said, and that’s exactly why the markets have reacted. But markets pricing in a rate rise doesn’t mean the Bank of England will actually pull the trigger. They won’t.

The Bank knows the housing market is fragile, confidence is thin, and the last thing they can afford right now is another rate shock hitting millions of homeowners. Last time rates moved too far too fast, the market nearly seized up overnight, he added.

Another sign interest rates are unlikely to drop is the fact lenders have been raising rates on fixed deals. Last week HSBC and Coventry Building Society announced hikes, followed by NatWest, Virgin and Nationwide.