The Bank of England held Bank Rate at 3.75% on 30 July 2026, the fifth hold in a row. Read the headline and you would assume borrowing costs are steady. They are not. Moneyfacts puts the average new mortgage rate at 5.59%, against 4.90% in March. The base rate is not the price anyone actually pays, and the gap between the two is where an investment purchase is won or lost this year.
What the Bank actually decided in July
The Monetary Policy Committee voted by a majority of 6 to 3 to hold Bank Rate at 3.75%. The three dissenters wanted an increase of 0.25 percentage points, to 4%.
The Bank reports CPI inflation has fallen to 2.6% since the previous meeting, but expects it to rise later this year as higher energy prices continue to pass through, with events in the Middle East keeping crude and refined prices elevated. The next decision is due on 17 September 2026.
The vote split is the part worth noting. A 6 to 3 hold with three members actively pushing for a rise is a materially different signal from a unanimous one. It argues against assuming the next move is a cut, though the Bank itself stresses the outlook could still shift either way as events in the Middle East develop.
Why mortgage rates rose anyway
Fixed-rate mortgages are not priced off Bank Rate. They are priced off swap rates, which reflect where the market expects Bank Rate to go over the term of the fix, not where it sits today. A hold accompanied by a hawkish vote split and an inflation warning pushes those expectations up, and mortgage pricing follows.
That is the mechanism behind the numbers. According to Moneyfacts, the average new mortgage rate reached 5.59%, up from 5.47% at the start of July and 4.90% in March. Borrowers with small deposits are being quoted above 6%. That is a rise of roughly 0.7 percentage points since March in a period when Bank Rate did not move at all.
Worth being precise about the source: this is Moneyfacts data on advertised rates, reported across the trade press from a single set of figures rather than independently gathered by several outlets. Treat it as a reliable directional read rather than a precise quote for your own case.
What it does to buy-to-let arithmetic
The effect compounds through leverage. Taking the Moneyfacts move at face value, and noting that it is a whole of market average weighted toward owner occupier lending, with buy to let specific pricing moving differently over the same window (Moneyfacts’ own buy to let table put a 75% loan to value two year fix at 5.27% on 1 August, and Rightmove’s buy to let tracker showed landlord rates easing), on a £500,000 interest-only facility, moving from 4.9% to 5.59% adds around £3,450 a year in interest before any other cost changes, so treat this as an illustration of rate sensitivity rather than a like for like buy to let cost. On a portfolio carrying £2m of debt, the same shift is roughly £13,800 a year.
The second effect is on how much you can borrow at all. Buy-to-let affordability is generally tested against a stressed interest rate rather than the pay rate, so when pricing rises the stress test rises with it, and the loan a given rent will support shrinks. Two identical properties bought six months apart can therefore need materially different deposits.
None of this happens in isolation. It lands at the same time as rising operating costs, including the licensing fees now passing £1,000 per property in a growing number of boroughs, and the possession changes that followed the end of the Section 21 transition.
What this means for property investors
Underwrite at the rate you can actually get. Not Bank Rate, not the rate you were quoted in spring. Get a live quote before you commit to a price, because a 0.7 point move is worth more to your return than most of the negotiating you will do on the purchase price.
If you are refinancing this autumn, assume no cut arrives first. Three MPC members voted for an increase and the Bank expects inflation to rise later this year. Planning a refinance around a hoped-for September cut is a position, not a forecast. Know what happens to your cover if the rate holds or rises.
Make the yield do the work. When debt costs more, thin-yielding stock stops clearing its own interest. This is the environment where higher-yielding assets, HMOs and multi-unit blocks among them, earn their extra management burden, and where prime low-yield stock struggles to make sense on leverage.
Low-leverage and cash buyers have a real edge right now. Not just on cost, but on certainty. A buyer who does not need a valuation to come in at a particular number is worth a discount to a motivated vendor, and in this market that discount is often available.
If you are pricing deals against today’s borrowing costs rather than last spring’s, it pays to see stock that was underwritten on the same basis. Browse our current listings or join the insider list for off-market opportunities before they are advertised.