The Mid-Year Rate Picture

Two Members Now Want to Raise. The Committee Has Shifted Hawkish.

On 18 June, the MPC voted 7-2 to hold. Two members voted to raise rates to 4% — the highest number of hawkish votes in this cycle. This is a striking development. In February, four members wanted to cut. By June, two wanted to raise. The committee that was almost cutting in February is now more worried about keeping rates too low than about keeping them too high.

The driver remains inflation. Although CPI has now fallen to 2.6% — the lowest reading of 2026 and meaningfully below March's peak of 3.3% — the Middle East energy situation continues to add upside risk. Two committee members clearly believe the current 3.75% rate is not doing enough to anchor inflation expectations. The majority disagree, but the fact that two are in the hawkish camp tells you cuts are not imminent.

For anyone tracking the rate cycle and its implications for property — either residential prices, mortgage costs, or commercial valuations — the June decision is a clear signal: do not build strategy around imminent rate cuts. Build strategy for a world where 3.75% is the rate for the foreseeable future.

Mortgage Approvals — Year-on-Year Comparison

Approvals in June 2026 were 58,200 — down from 64,664 in June 2025. Buyer activity is declining, not recovering, as rates remain elevated.

Source: Bank of England mortgage statistics

Mid-Year Scorecard

How Each Property Strategy Is Performing at the Halfway Point

Six months in, it is worth stepping back and assessing how the main property investment strategies are faring in the 2026 environment.

London Buy-to-Let

Under pressure. Yields ~4.2%, mortgage costs 4–5.75%, Renters Rights Act adding complexity.

Regional Buy-to-Let

Better margins (5–6.5% yields) but same regulatory burden. Works in the right location.

HMO / Multi-let

Higher yields (7–10%) but more management, licensing, and regulatory exposure than standard BTL.

Residential Flips

Works where there's genuine uplift to be had, but stamp duty and CGT eat into margins.

Commercial Holding

Strong yields (5–12%), FRI leases, no Section 21 politics. A different risk profile entirely.

Commercial to Resi PD

3–4x value uplift, 56-day prior approval, structural housing demand. Clearest opportunity in market.

The Full 2026 Rate Story — February to June

From near-cut (Feb) to near-raise (Jun) in four months. The MPC's journey through 2026 reflects how uncertain the inflation picture has been.

Source: Bank of England MPC minutes

Halfway through 2026, the market that was supposed to be recovering on the back of rate cuts is instead dealing with stubborn inflation, a regulatory reset for landlords, and falling buyer activity. Commercial conversion is not just an alternative strategy — it is the one strategy that does not depend on any of those things improving.
Second half outlook: Inflation is trending down. If it reaches 2.2–2.4% by September, the September MPC meeting becomes live for a cut. That would be the catalyst a lot of residential investors are waiting for. But commercial-to-residential conversion investors do not need to wait — the opportunity is available now, and it will narrow as rates eventually fall and competition increases.
Andrew Roberts

Andrew Roberts

Andrew Roberts is a CIMA Chartered Global Management Accountant and commercial property investor specialising in permitted development conversions, with a 100% prior approval success rate. Find out more.