Inflation remained steady in February, but rising energy costs and global uncertainty mean households could soon feel financial pressure.
UK inflation held at 3% in February, unchanged from January, according to the latest data from the Office for National Statistics. While this was in line with expectations and suggested inflation was gradually moving back towards the Bank of England’s 2% target, the wider outlook has since changed.
In recent weeks, escalating global tensions have driven up oil and commodity prices. As a result, inflation is expected to rise, with forecasts suggesting it could reach around 4% in the coming months. Higher energy costs are likely to feed through into household bills, particularly fuel and utilities, while also increasing costs for businesses.
The Bank of England chose to hold the base rate at 3.75% on 19 March, but the future outlook remains uncertain. Financial markets are already reacting to the changing economic landscape, with some predicting multiple interest rate rises over the next 18 months. There could even be up to four increases before the end of 2026.
Global instability
This marks a notable shift from earlier in the year, when steady rate cuts seemed increasingly likely. Instead, the combination of global instability and rising costs has created a more unpredictable environment for borrowers and lenders.
Some analysts now expect inflation to peak above 4% in the second half of 2026 before gradually easing in 2027. Interest rates could remain at their current levels for longer than previously anticipated.
Daily expenses
For households, this means continued pressure on daily expenses and a mortgage market that remains sensitive to global events. While the situation can change quickly, it reinforces the importance of staying informed and seeking advice when making financial decisions.
If you’re concerned about how rising inflation or interest rates could affect your mortgage, speaking to an adviser can help you understand your options and plan with confidence.