- Mortgage Force UK Ltd
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- February 22, 2026
UK 10-year government bond yields have fallen below 4.5%, currently sitting at 4.481% — their lowest level since 22 January. The move comes as investors react to a mix of weaker UK economic data, strong US jobs figures, and growing expectations of Bank of England interest rate cuts.
This latest shift in financial markets highlights how closely linked UK interest rates, inflation expectations, and global economic trends have become.
UK GDP Growth Slows in Q4 2025
New data from the Office for National Statistics (ONS) shows that the UK economy grew by just 0.1% in the fourth quarter (Q4) of 2025, below expectations of 0.2%. This matches the previous quarter’s modest growth and signals that the economy is losing momentum.
On an annual basis, UK GDP grew by 1.0% year-on-year, missing forecasts of 1.2% and marking the slowest annual growth rate since Q2 2024.
Monthly figures were also disappointing:
- Industrial production declined
- Construction output fell unexpectedly
The weaker-than-expected GDP data suggests the UK economy remains fragile, with businesses and consumers still cautious.
UK Gilt Yields Fall as Rate Cut Expectations Increase
In response to the softer economic data, UK 10-year gilt yields remained below 4.5%. Gilt yields move closely with expectations for interest rates — when investors expect rate cuts, yields tend to fall. Markets are increasingly pricing in further monetary easing from the Bank of England (BoE). Although the Bank’s Monetary Policy Committee (MPC) voted 5–4 to keep interest rates unchanged last week, the split vote and more dovish tone suggest rate cuts could be coming soon. Policymakers indicated that inflation may begin moving back toward the 2% target from April, increasing the likelihood of easing later this year.
Lower gilt yields can eventually help reduce mortgage rates and borrowing costs, offering some relief to households and businesses.
Strong US Jobs Data Delays Federal Reserve Rate Cuts
At the same time, strong economic data from the United States has influenced global markets. According to recent figures:
- 130,000 jobs were added in January, the largest monthly increase in over a year
- The US unemployment rate unexpectedly fell to 4.3%
This stronger-than-expected performance has led investors to believe that the Federal Reserve (Fed) will delay cutting interest rates.
Markets now fully expect the first US rate cut in July instead of June, and the probability of a cut in March has dropped below 5%. Because global bond markets are interconnected, US rate expectations often affect UK gilt yields and broader financial conditions.
UK Retail Sales Show Signs of Recovery
There was some positive news for the UK economy. UK retail sales rose 2.3% year-on-year in January 2026 on a like-for-like basis, up from 1% in December. This was the fastest growth since August and well above expectations of 1.2%.
The improvement suggests that consumers may have delayed Christmas spending to take advantage of New Year discounts. In-store sales recorded their strongest growth in more than six months. This rebound follows a weaker December and may signal improving consumer confidence after the slowdown in late 2025.
Political Stability Helps Calm Markets
After a brief period of market uncertainty, support from Cabinet ministers and across the Labour Party helped stabilise sentiment. For now, Prime Minister Keir Starmer appears to have regained political footing.
Reduced political uncertainty, combined with expectations of lower interest rates, has helped push down gilt and swap rates. What This Means for the UK Economy
In simple terms:
- Economic growth is slowing
- Inflation is expected to ease
- Interest rate cuts are becoming more likely
- Bond yields are falling
- Retail spending is improving
If inflation continues to move toward the Bank of England’s 2% target, we could see rate cuts later this year. That would likely support mortgage holders, businesses, and overall economic growth.
However, the economy remains delicate. Much will depend on inflation trends, global economic conditions, and how both the Bank of England and the US Federal Reserve respond in the months ahead.
What This Means for Homebuyers and Landlords Across the UK
While gilt yields and swap rates are set nationally, the impact is felt locally — whether you’re buying in Cambridge, remortgaging in Derby, investing in London, or reviewing your options in Edinburgh.
Falling UK gilt yields and growing expectations of Bank of England rate cuts could gradually improve fixed-rate mortgage pricing in the months ahead. However, lenders price products based on live swap rates and market conditions, meaning mortgage deals can change quickly.
That’s why local, up-to-date advice matters.
Speak to a Local Mortgage Broker
If you’re:
- A first time buyer looking to secure an affordable fixed rate
- A homeowner approaching the end of a deal
- A landlord reviewing your buy-to-let portfolio
Now is the time to assess your options before the next rate movement.
Speak to a Mortgage Force adviser in your area:
- Mortgage Broker in Cambridge
- Mortgage Broker in Derby
- Mortgage Broker in London
- Mortgage Broker in Edinburgh
Our local advisers provide independent, whole-of-market mortgage advice tailored to both national rate trends and local property markets.