Hopes of an early interest rate cut are fading making it increasingly likely the Bank of England will keep rates on hold today.
With the Monetary Policy Committee due to announce its decision at 12 noon today Equifax UK says policymakers are likely to take a cautious approach, despite some of the recent rise in inflation being driven by seasonal spending factors.
Affordability remains a major concern heading into 2026, particularly for households already stretched by higher housing and living costs.
Equifax data shows outstanding UK credit card debt is still 12.7% above pre-pandemic levels, underlining the continued pressure on consumer finances.
For mortgage borrowers, this means rate relief may take longer to arrive, while lenders remain focused on stress testing affordability and creditworthiness in a market where financial headroom is limited for many households.
AFFORDABILITY CHALLENGE
Paul Heywood, Chief Data & Analytics Officer at Equifax UK, said: “A jump in inflation complicates matters for the Bank of England. While the latest data can in part be attributed to seasonal spending factors, policymakers are likely to move with caution, making a February rate cut unlikely and leaving borrowers disappointed.
“Affordability continues to be a persistent challenge for the year ahead, and data from Equifax UK shows outstanding UK credit card debt remains 12.7% above pre-pandemic levels.
“Equifax will continue to work alongside its lending partners to help them understand borrower creditworthiness and affordability while also supporting borrowers to understand their financial health position.”
CAUTIOUS TONE
Market watchers also point to a cautious tone from central banks elsewhere. One City analyst pointed out to Mortgage Soup that eurozone inflation eased to 1.7% year on year in January, down from 2.0% in December, its lowest level since September 2024, but said this is still unlikely to trigger an immediate policy shift from the European Central Bank.
“Gilts and swaps marginally up, so it’s all eyes on the BoE and ECB for today’s rate decisions and post-event press briefings,” he said. “Don’t expect the unexpected as both look like taking a holding position.”
