BoE June Decision in Focus as FTSE 100 Posts +2.7% Weekly Gain and Nationwide Cuts 2-Year Fix to 4.35%

With the London Stock Exchange closed for the Spring Bank Holiday on Monday 25 May 2026, UK investors and homeowners are looking ahead to a particularly consequential combination of macro events: the Bank of England’s rate decision on 18 June, the May CPI release expected in mid-June, and the next round of mortgage rate adjustments by major lenders. The FTSE 100 closed Friday 22 May at 10,466.26 points, up 2.7% on the week, while Nationwide Building Society cut its 2-year fixed mortgage rate at 60% loan-to-value to 4.35% — the lowest level offered since the autumn of 2025.

BoE June decision: hold or cut

The Monetary Policy Committee meets on Thursday 18 June 2026. After holding Bank Rate at 3.75% in May, market expectations have shifted toward a 25 basis point cut to 3.50%, with money markets now pricing approximately a 70% probability of a move. The shift reflects UK April CPI of 2.5% (down from 2.8% in March) and clearer signals from Governor Andrew Bailey that the easing path will continue if inflation continues to converge towards the 2% target. The split on the MPC remains finely balanced, however, particularly given the upside risk from Iran-related energy prices.

FTSE 100: a strong week

The blue-chip index closed Friday at 10,466.26, a weekly gain of 2.7% and the best week since March. The rally was driven by oil majors — BP and Shell outperformed on weekly views even as Brent eased — and by banking stocks as the BoE’s easing trajectory firmed up. HSBC, Barclays, and Lloyds Banking Group all closed the week up between 3% and 5%. The FTSE 250, more domestically focused, gained a more modest 1.2%, reflecting persistent concerns about UK growth.

Nationwide cuts to 4.35%

Nationwide Building Society reduced its flagship 2-year fixed mortgage at 60% loan-to-value to 4.35% — its lowest level since autumn 2025. Other major lenders are widely expected to follow in the days ahead. Robert Gardner, Nationwide’s Chief Economist, said in the announcement: „Falling swap rates and improving market expectations for Bank Rate are allowing us to pass on competitive pricing to homebuyers.” For first-time buyers and remortgagers, the move marks an inflection point after twelve months of stagnation in mortgage pricing.

CPI track and second-round effects

UK April CPI came in at 2.5%, down from 2.8% in March — surprising consensus, which had expected a 2.7% reading. Energy prices remained the principal disinflationary driver, with the Ofgem cap update of 1 April pulling household energy costs lower. Services inflation, the BoE’s preferred underlying measure, fell to 4.9% from 5.1% in March, but remains uncomfortably above the level consistent with the 2% headline target. Wage growth slowed to 5.4% over the three months to March, the lowest reading since mid-2022.

IMF doesn’t recommend a hike

In its annual Article IV review of the UK economy, published in May, the International Monetary Fund recommended that the Bank of England maintain its current path of gradual rate cuts, „consistent with anchoring inflation expectations while supporting the recovery.” The Fund noted that UK growth remained underwhelming relative to G7 peers and that the labour market had eased somewhat — supporting the case for further cautious monetary easing.

Sterling and gilt market

Sterling closed Friday at 1.2725 against the US dollar and 1.1714 against the euro, near the low of its 2026 range. Gilt yields drifted modestly higher across the curve, with the 10-year gilt closing at 4.42%. The market is now pricing roughly two BoE cuts by year-end, taking Bank Rate to 3.25% by December. The trajectory is consistent with the broader European narrative of central banks adjusting to the energy shock without yet rotating decisively toward tightening.

Mortgage market: the structural picture

According to UK Finance, mortgage approvals in April rose 4% month-on-month, suggesting that the housing market is starting to respond to the gradual easing in mortgage rates. House price growth, measured by the Nationwide index, edged up to 1.8% year-on-year in April, the highest reading since mid-2024. The London market continues to lag the national picture, with prime central London prices still down 0.4% year-on-year — a reminder that political uncertainty and tax pressures continue to weigh on the upper end of the market.

Outlook for the week ahead

With markets closed Monday, attention turns to Tuesday’s reopening and a packed agenda — the eurozone consumer confidence release on Tuesday, the German Ifo business climate survey on Wednesday, and US PCE inflation data on Friday. For UK markets specifically, the absence of major domestic data this week means moves will largely be driven by global factors: oil prices, US economic indicators, and political news on the Labour leadership question. The ECB decision on 5 June and the BoE decision on 18 June stand as the two pivotal moments for European fixed income over the next three weeks.