Markets Turn on a Knife Edge: From Rate Cuts to Price Hikes in a Matter of Weeks

Just a few weeks ago, the conversation was centred around rate cuts. Today, the narrative has shifted dramatically.

The Bank of England has held rates at 3.75%, with a unanimous 9–0 vote, but the direction of travel is far less certain than it was even recently. Markets are now pricing in a 40% probability of a 25bps rate hike, a stark reversal in sentiment.

So what’s changed?

Geopolitics is back at the centre of the market.

Escalating tensions in the Middle East, most notably Israeli strikes on Iran, have driven a sharp increase in energy prices.

The knock-on effect is clear:

• Rising energy costs
• Renewed inflationary pressure
• Increased uncertainty around monetary policy

Unlike political or economic cycles, geopolitical events come with no defined timeline, making them far harder for markets and lenders to price.

Immediate impact on funding markets

We’ve already seen swap rates swing significantly, triggering:

• Rapid lender repricing
• Product withdrawals
• Increased volatility in debt costs

This has happened within days, not months.

The implication is clear: the stability many borrowers were hoping for is no longer a given.

Developers feeling the pressure

For developers, this creates a challenging combination:

• Rising build costs (driven by energy and materials)
• Higher debt costs (as rates move against expectations)

All within an environment that was already far from easy.

A shadow over private credit

Compounding this further, one of the UK’s largest non-bank lenders has entered administration amid suspected fraud, with links to major institutional capital, with others to follow.

This will inevitably:

• Tighten credit appetite
• Increase scrutiny across deals
• Encourage slower decision-making across the market

Private credit has been a critical source of liquidity, any disruption here has a material ripple effect.

What this means for borrowers

The key takeaway is simple: the market has shifted, and quickly.

• Large loans and complex structures will face greater scrutiny, particularly those with either large operational expenditure or capital expenditure requirements – think trading businesses, or development projects
• Execution risk is increasing due to all the above
• Pricing is becoming more volatile – We’ve seen lenders knee-jerk twice within the week

In this environment, having the right advice and lender access is no longer optional, it’s critical.

From cuts to hikes, in three weeks

Three weeks ago, we were discussing the timing of rate cuts.

Today, we’re preparing for the possibility of further hikes.

Where do we go from here?

Markets will remain sensitive to geopolitical developments and inflation data in the near term. In the meantime, borrowers need to be:

• Proactive
• Well-advised
• Structurally prepared

Get in touch

If you’re currently reviewing an acquisition, refinancing or sound boarding an appriasal, now is the time to sense-check your strategy.

In a market like this, access is everything. Through our relationships across bank and private credit markets, we connect you directly with lenders and unlock structures and pricing that aren’t publicly available.

This is where the right advice makes a tangible difference, ensuring you’re not just getting a deal, but the right one.

Get in touch to discuss your position:

[email protected]