The Bank of England looks set to hold interest rates steady once again, and analysts at Societe Generale now warn that the wait for the first rate cut could stretch even further into the future than markets have been pricing in. The French bank's UK team points to a widening gap in the economy: households are pulling back sharply on home loans even as businesses keep borrowing with confidence, a split that is complicating the central bank's next move just as energy prices push inflation higher again.
Home buyers pull back sharply
The Bank of England's own Money and Credit report, released last week, showed mortgage approvals sliding to their lowest level since late 2023. Societe Generale's team linked the drop directly to higher mortgage rates, which have made monthly repayments costlier for prospective buyers and pushed many to delay purchases altogether. Crucially, the bank does not expect this to be a one-off dip. Its analysts described it as a trend that is likely to continue, meaning the property market could stay subdued for a while yet as borrowers wait for cheaper financing that may not arrive on the timeline they hope for. A falling mortgage-approval count is widely watched because it usually foreshadows slower home sales and construction activity a few months down the line, so the latest reading adds to signs that Britain's housing sector is losing momentum under the weight of tighter credit conditions.
Business borrowing tells a different story
While households are retreating, companies are doing the opposite. Lending to businesses has stayed firm even as mortgage demand has slumped, and Societe Generale reads this as a sign that firms are not spooked by the current rate environment. The bank's team said this resilience in business credit suggests that the recent uptick in business investment could extend into the second half of 2026, meaning companies may keep spending on expansion, equipment and hiring even if consumers stay cautious. That divergence between a cooling housing market and a steady corporate borrowing appetite is exactly the kind of mixed signal that makes a central bank's job harder, since loosening policy to help homeowners could end up overheating an already-firm business sector, while holding rates too long could deepen the housing slump.
What the Bank's rate-setters are likely to say this week
Members of the Bank of England's Monetary Policy Committee, the panel that sets UK interest rates, are due to appear before the Treasury Committee, a parliamentary body that regularly questions policymakers on the economy, on Tuesday. Societe Generale expects them to stick to their now-familiar script and reiterate a wait-and-see approach rather than commit to any near-term move on rates. However, the bank's analysts flagged one detail worth watching closely: whether MPC members choose to comment on the recent rise in energy prices and whether it has shifted their thinking on inflation. Energy costs feed directly into households' bills and businesses' running costs, so a jump in energy prices tends to push headline inflation higher, giving the central bank less room to cut rates even if underlying growth looks soft.
Wage pressures stay contained for now
One factor that has so far kept the Bank of England from turning more hawkish is wages. Societe Generale's team noted that wage expectations are showing only limited second-round effects, a term economists use to describe a scenario where rising prices push workers to demand higher pay, which employers then pass on through even higher prices, creating a self-reinforcing inflation spiral. With that spiral not materialising in a significant way so far, the central bank has one less reason to worry that inflation will become entrenched, even as energy costs climb and headline price pressures build elsewhere in the economy.
The first rate cut may now slip beyond early 2027
Putting these threads together, energy-driven inflation risk, resilient business lending, weak housing demand and a still-cautious Monetary Policy Committee, Societe Generale said the balance of evidence could push back its own rate-cut forecast. "This could force us to push back the timing of the first rate cut, which we currently expect in 1Q27," the bank's UK team said. That timeline already places the first cut more than a year away, and Societe Generale's caveat signals that even that distant date carries real risk of slipping further if energy prices keep climbing and inflation proves stickier than hoped. For now, the message from Societe Generale is that the Bank of England is likely to stay firmly in wait-and-see mode, keeping borrowing costs higher for longer while it watches how energy prices, business investment and the housing slowdown play out in the months ahead. Anyone with a mortgage, a business loan or savings tied to UK rates will be watching Tuesday's Treasury Committee hearing closely for any hint of a shift in tone.
