📌 THIS WEEK IN BRIEF

Two big stories collided this week, and together they tell you more about where mortgage pricing is heading than either one alone.

The BoE decision: a hold, but a more divided one

The Bank of England held the base rate at 3.75% on 18 June, exactly as markets expected. But the vote split tells a more interesting story than the headline. The MPC voted 7-2 to hold, up from 8-1 in April. Megan Greene joined Huw Pill in voting for an immediate rise to 4%, doubling the hawkish minority in a single meeting. The Bank's minutes confirmed that May CPI held at 2.8%, but services inflation, the component the Committee watches most closely as a signal of domestic price pressure, rose to 3.7% from 3.2%. That is the detail driving the more divided vote. Headline inflation has cooled. The detail underneath has not.

Andrew Bailey called the recent drops in oil prices "encouraging" but said high energy prices during the conflict have left "inflationary pressure in the pipeline." Huw Pill, who voted to raise, argued for "prompt but modest action" to keep policy "well-placed to address the significant uncertainties" the Committee faces. The debate is no longer about direction. It is about timing, and a third member, Catherine Mann, voted to hold but made clear in her published rationale that she is actively watching business pricing and 2027 wage settlements. She is not voting to hike yet. But she is close enough to it that her position matters.

For anyone with a mortgage decision ahead, the practical read is this: a tracker mortgage holder sees no change today. A fixed-rate holder is unaffected until their deal ends. What moves is the swap rate, and swap rates have actually eased since the decision, helped far more by the fall in oil prices than by anything the Bank said. The next decision, on 30 July, carries a new Monetary Policy Report and is being treated by analysts as the more consequential meeting of the two.

Keir Starmer resigns. Andy Burnham is the clear favourite to replace him.

On Monday 22 June, Keir Starmer announced his resignation as Prime Minister and Labour leader, becoming the sixth UK Prime Minister to resign outside Downing Street in seven years. The proximate trigger was Andy Burnham's decisive win in the Makerfield by-election on 18 June, the same day as the BoE decision, which returned him to Parliament and made him eligible to challenge for the leadership. Burnham, the former Greater Manchester mayor, is the runaway favourite to succeed Starmer. Wes Streeting, previously seen as his most likely rival, has thrown his support behind Burnham instead.

Nominations for the Labour leadership open on 9 July and close on 16 July. If no challenger emerges, Burnham could be confirmed as leader at the close of nominations and installed in Downing Street shortly after, with some analysts pointing to mid to late July. Starmer remains in post as a caretaker Prime Minister until the contest concludes.

Why does a change of Prime Minister matter for the housing market? Directly, not much, in the short term. Indirectly, quite a lot. A new Prime Minister means a likely reshuffle, a probable shift in fiscal priorities, and renewed market attention on the public finances. The UK's fiscal position is already under more scrutiny than most G7 peers, and any signal of increased borrowing or spending under a new leader will be watched closely by the gilt market. So far, the market reaction has been calm rather than alarmed, helped considerably by the parallel good news on oil prices.

The oil story is doing more work than the politics

Brent crude has fallen to around £74 a barrel this week, its lowest level since before the conflict began, as tankers resume transiting the Strait of Hormuz following progress in US-Iran talks. Shipowners are now openly transiting the waterway with safety guarantees from the International Maritime Organization, and oil prices have fallen nearly 40% from their wartime peak. This is the single biggest tailwind for UK inflation and, by extension, for mortgage pricing, that has emerged all year. If it holds, the disinflationary effect over the coming months could matter more for your mortgage than anything the Bank of England or Downing Street do next.

Growth: the PMI signals are not encouraging

The flash composite PMI for June fell to 49.4, a 14-month low, signalling contraction for a second consecutive month. The weakness is concentrated entirely in services, where the flash services PMI fell to 48.7, a 41-month low, as new orders declined for a third month amid subdued domestic and overseas demand. Manufacturing told a different story, with the flash manufacturing output index rising to a 21-month high of 53.6, though S&P Global noted this boost looks temporary, with new order growth slowing to a six-month low as the benefit from customer frontloading begins to fade. This follows GDP growth of 0.6% in Q1 2026 and a 0.1% contraction in April, the first monthly fall since August 2025. Rising input costs and persistent services inflation remain the central concern feeding into the Bank's more divided vote this month.

Inflation: the headline is better than the detail

CPI held at 2.8% in May, unchanged from April. The Bank's central projection, based on energy market pricing as of 15 June, now expects inflation "a little under 3%" in Q3 2026 and "a little over 3¼%" in Q4, both lower than its April forecast thanks to falling energy prices. But services inflation rising to 3.7% is the detail that pushed two MPC members to vote for a hike this month, and it is the figure to watch most closely ahead of the 30 July decision.

Politics: a transition is underway, and the market has so far taken it in its stride

Starmer's resignation followed months of pressure after Labour's heavy losses in the May local elections, where the party lost more than 1,000 council seats. Two senior ministers, Defence Secretary John Healey and Armed Forces minister Al Carns, resigned on 11 June over disagreements with the government's defence investment plan, adding to the pressure that culminated in Burnham's by-election win and Starmer's resignation eleven days later. The 10-year gilt yield actually eased this week, falling to around 4.78% on 24 June, as fears of a disorderly leadership transition receded once Burnham emerged as the unchallenged favourite. That said, attention is already turning to what a Burnham government's fiscal agenda might look like, and any sign of increased gilt issuance to finance higher spending is a risk worth watching into the autumn.

The private credit update: a major new development this week

This is the most significant private credit story we have covered since the Market Financial Solutions collapse. On 19 June, the Bank of England launched the next phase of its system-wide exploratory scenario, sending 46 participating firms, including major alternative asset managers such as Apollo, Ares, Bain Capital and KKR, a hypothetical stress scenario to model their behaviour against. The scenario is deliberately severe: a global shock that sends equity markets down 35%, pushes inflation to 7%, shrinks the UK economy by 4%, and raises unemployment sharply over a five-year horizon. It is not a forecast. It is a stress test designed to reveal how the private markets ecosystem would behave under extreme pressure, and crucially, whether the collective actions of lenders and asset managers could amplify a crisis rather than absorb it.

The scale of UK exposure is now clearer than it has been. UK banks are estimated to hold £173 billion of banking book exposure to private market funds and highly leveraged, sponsor-backed corporates, equivalent to 8% of their total committed wholesale limits. The Bank will share initial findings in its July Financial Stability Report, with interim Round 1 results later in 2026 and a final report in 2027. Given the housing market's direct exposure to private credit through development finance, this is a story we will track edition by edition as findings land.

What is happening: Gilt yields dipped to 4.78% on 24 June, extending declines for a second session and moving closer to the two-month low of 4.745% touched on 17 June. Two forces are pulling in the same direction here. First, oil: Brent fell below $74 a barrel this week, its lowest since late February, as tanker traffic through the Strait of Hormuz normalises. Second, political risk easing: the gilt market's initial nervousness around Starmer's resignation faded once Burnham emerged as the unchallenged favourite to replace him, removing the prospect of a disorderly contest.

Why it matters for mortgages: The average 2-year fix has fallen to 5.54% and the average 5-year fix to 5.56%, both down meaningfully from last edition's 5.68% and 5.63%. This is the clearest weekly improvement in mortgage pricing we have reported all year, and it is being driven almost entirely by the oil price collapse feeding through to swap rates, not by anything the Bank of England has done. Several major lenders, including NatWest, Barclays, Santander, Halifax and TSB, have cut fixed rates multiple times in June as swap rates have fallen.

What to watch next: The 30 July BoE decision carries a new Monetary Policy Report and is the more consequential of the two meetings this summer. With the vote split moving hawkish even as headline data improves, the path of services inflation over the next month will matter more than the oil price for what the Bank does next.

Data: Moneyfacts/HomeOwners Alliance, 22-24 June 2026

Mortgage product choice has climbed above 7,000 options for the first time since March, and mortgage approvals reached their highest level in fifteen months in April, at around 65,900. Nearly one million five-year fixed deals taken out in 2021 at an average rate of 2.59% will expire in 2026. Anyone rolling onto the SVR of 7.13% rather than remortgaging faces a severe payment shock.

The South West is a genuinely mixed picture this edition, and the data is more positive than the broad "southern markets are weak" narrative might suggest. Across the region, the average house price for homes bought with a mortgage rose 3.5% in the year to April 2026, to £302,000, up from £291,000 a year earlier, according to ONS local housing data drawn from the Land Registry. That puts the South West's annual growth rate above the England average of 3.9% only marginally below, and meaningfully ahead of the South East, which fell 0.2% over the same period.

Bristol, the region's largest city, tells a more static story at the city level: the average house price was £354,000 in April 2026, essentially unchanged from £353,000 a year earlier. But it is the rental market in Bristol that stands out. Average private rents in the city rose 7.9% annually to £1,883 a month in May 2026, well above the South West regional average rent increase of 5.1% to £1,234, and far above the England-wide rental growth rate of 3.4%. Terraced properties in Bristol saw rents rise 8.1%, and three-bed properties rose 8.4%, reflecting acute demand pressure from the city's large student population and growing tech and financial services workforce.

What is driving the divergence between sales and rental markets

The pattern across the South West is consistent with what we have seen nationally: sales price growth is positive but modest, while rental growth in the region's largest city is running well ahead of both sales price growth and national rental inflation. This points to a market where buying activity is constrained by affordability and mortgage costs, while rental demand continues to outstrip supply, particularly in Bristol's city centre and around its universities. Coastal markets in Devon and Cornwall, which carry a higher proportion of second homes and holiday lets, tend to show more muted and seasonal price movements than Bristol, though this edition's data does not isolate those areas separately.

A note for buyers and landlords

For anyone considering the South West, the data this edition supports cautious optimism on sales prices and continued strength in rental yields, particularly in Bristol. The region sits in the middle of the national table on both affordability and growth, behind the North East and Scotland but ahead of London and the South East.

Next edition spotlight: East Midlands.

Average mortgage rates have fallen meaningfully this week, from 5.68% to 5.54% on the average 2-year fix and from 5.63% to 5.56% on the average 5-year fix. If you have a mortgage decision in the coming weeks, here is how to think about it.

If your deal ends in the next six months: most lenders allow a new rate to be reserved up to six months ahead of your deal expiring, and many allow you to switch to a lower rate if pricing improves before completion. That means there is little reason to wait. Lock in a rate now to protect against any reversal in the oil price story, while keeping the option to move lower if rates keep falling.

If your deal does not end for a while: there is nothing to action yet, but it is worth tracking swap rates rather than just the BoE decision dates. This week is the clearest example yet of fixed-rate pricing moving meaningfully between BoE meetings, driven by oil and political risk rather than the base rate itself.

If you are currently on your lender's SVR: at an average of 7.13%, the gap between the SVR and the best available fixed rates is now wider than it has been all year. This is the single most expensive position to be in, and the easiest one to fix.

Send your questions to [email protected]

This week: "Does it matter for my mortgage that we are getting a new Prime Minister?"

Our answer: Not directly, and not immediately. The Bank of England sets the base rate independently of the government, and that has not changed. Your existing fixed-rate deal is entirely unaffected. Your tracker or SVR rate is tied to the base rate and lender pricing, not to who occupies Downing Street.

Where it can matter is indirectly, through the gilt market. Government borrowing costs and political stability feed into investor confidence in UK debt, and that confidence feeds into gilt yields, which in turn feed into the swap rates that price fixed mortgages. This week is actually a good example of that mechanism working in a reassuring direction: gilt yields eased rather than spiked as Andy Burnham emerged as the clear, unchallenged successor to Keir Starmer, removing the uncertainty of a contested leadership race.

The bigger question is what fiscal priorities a Burnham government sets once in place, expected by mid to late July. If markets judge that a new government plans significantly higher borrowing or spending without a credible plan to fund it, that is the scenario that could push gilt yields and mortgage rates higher. We will track this closely as Burnham's policy agenda becomes clearer over the coming weeks.

Educational purposes only. Not financial advice. Always consult an FCA-regulated mortgage broker.

1. BoE Vote Turns More Hawkish: 7-2 Hold, Up From 8-1 in April The Bank of England held the base rate at 3.75% on 18 June, but the vote split widened to 7-2 from 8-1 in April, with Megan Greene joining Huw Pill in voting for an immediate rise to 4%. Services inflation rising to 3.7% from 3.2% was the key driver behind the more divided vote, even as headline CPI held at 2.8%. The next decision, on 30 July, includes a new Monetary Policy Report. Source: Bank of England Monetary Policy Summary and Minutes, 18 June 2026

2. Keir Starmer Resigns as Prime Minister. Andy Burnham the Clear Favourite to Succeed Him. Keir Starmer announced his resignation as Prime Minister and Labour leader on 22 June 2026, following sustained pressure after May's local election losses and Andy Burnham's decisive Makerfield by-election win on 18 June. Burnham is the runaway favourite to succeed him, with nominations opening 9 July and closing 16 July. A transition is expected by mid to late July. Gilt yields eased rather than spiked on the news, as markets welcomed the lack of a contested race. Source: Reuters, NPR, Al Jazeera, 22 June 2026

3. Brent Crude Falls Below $74, Lowest Since Before the Conflict, as Strait of Hormuz Traffic Normalises Brent crude fell to $73.76 a barrel on 24 June, down nearly 40% from its wartime peak, as tanker traffic through the Strait of Hormuz resumes following progress in US-Iran talks and safety guarantees from the International Maritime Organization. The fall has helped push UK gilt yields and average mortgage rates lower this week, with the average 2-year fix dropping to 5.54% from 5.68% last edition. Source: Trading Economics, Reuters, 24 June 2026

This week brought the clearest weekly improvement in mortgage pricing we have reported all year. Model your current payments against today's lower rates and see what locking in now versus waiting could mean for your monthly budget.

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UK Property Pulse sends every Thursday at 7:30am. Subscribe: ukpropertypulse.co.uk/subscribe Contact: [email protected] UK Property Pulse is not authorised or regulated by the FCA. Nothing in this newsletter constitutes financial advice. Always consult a qualified, FCA-regulated mortgage broker before making mortgage decisions.

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