September 2026 LinkedIn Newsletter

A London FS thought piece on rate cycles, gilts and what history actually tells us — and what it means if your fixed rate ends in the next six months.

I had a client on the phone last week, halfway through remortgaging, asking me if the world was about to fall apart. She had read a headline about gilt yields hitting their highest level since 1998 and jumped straight to “should I be panicking?” I told her the honest answer, which is the one I’ll give you here: no — but you should be paying attention, and there’s a difference between the two that most of the coverage doesn’t bother making.

Here’s where we actually are. The Bank of England has held its base rate at 3.75% since December, but three of the nine people on the Monetary Policy Committee voted to raise it to 4% at the last meeting. The Federal Reserve has done the same dance, holding at 3.5% to 3.75% in July with three dissenters wanting a hike. The ECB, having spent two years cutting, actually raised rates in June. Markets are now pricing in a Bank of England hike by the end of this year and another by next March. Nobody saw that coming twelve months ago. I certainly didn’t — and I’ve been doing this a long time.

Part I — History

The bit that rhymes with history

The instinctive comparison everyone reaches for is 2008, mostly because gilt yields have been flirting with levels not seen since the financial crisis. I think that’s the wrong parallel. 2008 was a solvency crisis inside the banking system. What’s actually driving this year’s inflation scare is an old-fashioned supply shock: the conflict in the Middle East has pushed energy prices up, and energy prices feed into everything from your gas bill to the diesel in the lorry that delivers your groceries. That’s not a credit crunch. That’s 1973 with better broadband.

The 1973 oil embargo and the 1979 shock that followed it both did the same thing central banks are wrestling with now: they handed policymakers inflation that had nothing to do with domestic demand and everything to do with a geopolitical event thousands of miles away — and then asked them to fix it anyway. Paul Volcker’s answer at the Fed was brutal, dragging rates up into the high teens and inducing a recession on purpose to break the back of inflation expectations. Nobody is remotely close to that today, and I’d be doing you a disservice if I implied otherwise. But the mechanism — an oil shock forcing central banks that would rather be cutting into holding or hiking instead — is genuinely the same one working through the system right now.

History doesn’t repeat, but this bit is doing a passable cover version.

Part II — Global rates

Why one central bank moving drags the others with it

This is the part that actually matters for your mortgage, so bear with me. Central banks don’t set policy in a vacuum. The UK imports the overwhelming majority of its energy, so when the Fed gets twitchy, the pressure on the BoE to follow isn’t really a choice. It’s closer to a chain reaction:

1. The Fed leans hawkish
2. Capital flows toward the dollar, chasing the higher return
3. Every other currency comes under pressure
4. Inflation is pushed into importers like the UK — and the BoE follows

You can see it in the chart above: UK, US and eurozone policy rates have moved in near lockstep through every cycle since the financial crisis, even though the underlying domestic stories in each economy are quite different. That correlation is not a coincidence. It’s the mechanism working exactly as it’s supposed to, whether or not anyone enjoys the result.

Part III — Headlines

Is the media scaremongering you?

Somewhat, yes — though I would put it more precisely than that. The facts being reported are mostly accurate. What gets lost is context.

A lot of people — myself included — got used to treating that low-rate world as normal. It wasn’t. What’s happening now is a return closer to the historical mean, dressed up as a crisis because the mean feels shocking after fifteen years near zero.

That doesn’t mean there’s no pain. Anyone on a five-year fixed taken out in 2021 who’s about to roll onto today’s pricing is in for a genuinely difficult conversation, and I have those conversations most weeks. But “difficult” and “unprecedented” are not the same word, and the papers have a habit of reaching for the second one because it sells better.

Part IV — Gilts

Will gilts fall in the coming weeks?

I would love to tell you yes. I don’t think the evidence supports it. Markets are currently pricing a Bank of England hike, not a cut, and the Autumn Budget is sitting on the calendar with the Chancellor under real pressure to show the fiscal numbers add up. Both of those are reasons for yields to stay elevated or drift higher rather than ease off.

If the Middle East situation calms down and oil retreats meaningfully, you would likely see some relief follow fairly quickly, because a decent chunk of the current move is energy-driven rather than structural.

Betting your mortgage strategy on a geopolitical de-escalation happening on your timetable isn’t a plan. It’s a hope — and I don’t build client strategies around hope.

Part V — The debt league table

Who’s actually holding the cards

The headline you read will depend entirely on which number the journalist chose to lead with, because the answer changes depending on whether you’re measuring in cash or as a share of the economy.

In cash terms, the US is in a league of its own, owing more than China, Japan, the UK and France combined. As a share of the size of its economy, though, Japan is the clear outlier at over 200% — roughly double America’s ratio.

Part VI — Your mortgage

What this means for the next six months

This is the part clients actually want, so I won’t bury it. Fixed mortgage rates in the UK price off swap rates, not the base rate directly, and swaps have already absorbed this hawkish shift. That means the room for fixed pricing to fall much further from here — absent a genuine change in the inflation picture — is limited.

Average two-year fixes are sitting around 5.6% and five-year fixes close behind (Moneyfacts), with the sharpest deals in the low 4s for borrowers with strong equity. I don’t expect a collapse in those numbers.

Remortgaging in that window? My honest advice:

• Don’t wait for a rescue the market isn’t currently pricing in.
• Lock in early where the numbers work.
• Keep an eye on your options right up to completion, in case something better appears.
• Don’t let a scary headline about 1998 or 2008 make the decision for you.

Those years had their own problems. This one has its own too — and it’s not the same problem wearing a different coat, whatever the front pages would have you believe.

Your home may be repossessed if you do not keep up repayments on your mortgage.