20th March 2026
No not rises, but fewer cuts than previously expected.
Most economic analysts had expected the Bank of England to start cutting rates early in 2026. But because inflation has been stubborn, wage growth is still strong, and global energy prices have spiked again, expectations have shifted.
Current analyst consensus
Interest rates are expected to stay higher for longer.
Cuts may be delayed, smaller, or fewer than previously forecast.
A rate increase is not the central expectation — but analysts now say it cannot be ruled out if inflation rises again.
The risk of a rate rise is back on the table, even if it's not the base case.
This is a big change from late 2025, when markets were pricing in several cuts.
How would this affect the housing market?
Higher for longer interest rates or even the threat of a rise — have very real consequences for the housing market.
Mortgage rates will stay elevated
Even without a rate rise, lenders price in expectations.
If markets think rates will stay high:
fixed‑rate mortgages stay expensive
remortgaging becomes painful for households coming off older deals
first‑time buyers struggle with affordability
This hits rural Scotland particularly hard, where incomes are lower and housing stock is older and less energy‑efficient.
House prices could stagnate or fall slightly
Analysts expect:
flat or slightly falling prices in many areas
bigger falls in overheated markets (London, SE England)
more resilience in rural areas with limited supply (Highlands, islands, Moray, Aberdeenshire)
But the key point is this:
higher borrowing costs cap what buyers can afford, which puts a ceiling on prices.
Landlords face pressure — and may sell
Higher mortgage costs for landlords mean:
some will sell up
rental supply may shrink
rents may rise further
This is already happening across Scotland.
New‑build construction slows
Developers build fewer homes when:
mortgages are expensive
buyers are cautious
costs are rising
This worsens Scotland's long‑term housing shortage.
Rural areas like Caithness and Sutherland feel it differently
In places like Wick, Thurso, and the wider Highlands:
fewer buyers
fewer lenders offering competitive deals
older housing stock needing upgrades
lower wages relative to mortgage costs
This means higher rates bite harder, even if house prices don’t fall as sharply as in cities.
Could a rate rise actually happen?
It’s not the central forecast — but it’s no longer unthinkable.
A rate rise could happen if:
energy prices spike again
global conflict pushes up inflation
wage growth stays high
the pound weakens
inflation expectations drift upwards
The Bank of England is extremely cautious right now.
If inflation rises again, they will act.
What should households be thinking about?
Here’s the practical, Highlands‑aware view:
If you’re remortgaging
Start shopping around 6 months early
Consider shorter fixes if you think rates will fall later
But avoid variable rates unless you can absorb shocks
If you’re buying
Don’t rush as the market is not running away
Focus on energy efficiency (big factor in rural Scotland)
Stress‑test your budget at 1-2% higher than current rates
If you’re renting
Expect rents to stay high or rise
Some landlords may sell — be prepared for instability
If you’re a landlord
Higher rates + new regulations = pressure
Some will exit the market, especially in rural areas
Analysts are not predicting rate rises as the base case.
But they are warning that cuts will be slower and smaller.
A rate rise is now a real risk, not a fantasy.
The housing market will feel the pressure through mortgage costs, slower price growth, and tighter lending.
Rural Scotland including the Highlands will feel the squeeze differently, and often more sharply.