Fixed rate ending in 2027? What Budget 2026's inflation and gilt forecasts mean for Thames Valley business remortgages

Many Reading and Thames Valley businesses that bought or refinanced their premises in 2022 took five-year fixes that end in 2027. Budget 2026, published on 28 October 2026, contains the Office for Budget Responsibility's latest forecasts for inflation and growth, and some plain words about gilt yields. It does not contain a forecast for Bank Rate. This article sets out what the Budget does say, what it does not, and how to time a remortgage around it.

What the Budget says about inflation

The central forecast is a peak in early 2027 followed by a slow return to target.

• Now: "Inflation has since risen to 3.5% in September" (Budget 2026, para 1.13). Core inflation was 2.8% in September 2026 (Budget 2026, Box 1.B).
• Peak: "Inflation is forecast to peak at 3.8% in Q1 2027 before returning to the 2% target by Q3 2028" (Budget 2026, para 1.37).
• Annual figures: CPI inflation of 3.1% in 2026 and 3.4% in 2027, then 2.1% in 2028 and 2029 (Budget 2026, Table 1.1).
• Budget effect: the measures in the Budget are expected "to reduce inflation by 0.1 percentage points in 2027" (Budget 2026, para 1.38).

The Monetary Policy Committee's remit reaffirms the 2% CPI target (Budget 2026, para 6.4). In other words, the forecast has inflation well above target for most of 2027, which is exactly when many fixes end.

What it says about interest rates and gilts

This is the point to be precise. Budget 2026 does not give a numeric path or assumption for Bank Rate, and it gives no numeric gilt yield forecasts. Anyone quoting a Budget forecast for Bank Rate in 2027 is not quoting this document.

What the Budget does say is qualitative:

• "Higher inflation has led to higher interest rate expectations, with households, firms and governments facing tighter financial conditions. Since the start of the conflict in the Middle East, UK gilt yields have increased broadly in line with the G7 average" (Budget 2026, para 1.15).
• The OBR expects growth to slow to 1.0% in 2027 as higher energy prices feed through and "higher interest rates weigh on the economy" (Budget 2026, para 1.32).
• The government argues that "Lower borrowing helps the Bank of England to reduce inflation, reducing mortgage costs for households and borrowing costs for businesses" (Budget 2026, para 1.26).

Gilt yields matter to business borrowers because fixed-rate commercial lending is generally priced off swap rates, which move with gilt markets. The Budget also shows government gilt sales of £250.6bn in 2026-27, with short-dated conventional gilts making up 42.9% of issuance (Budget 2026, para 1.46 and para A.11). That does not tell you where rates will go, but it does explain why the short end of the market is under scrutiny.

The downside and upside scenarios

The Budget gives one explicit sensitivity. If energy prices follow a lower path, "real GDP growth could be 0.5 percentage points higher in 2027 and borrowing could be £12 billion lower in 2027-28" (Budget 2026, para 1.16). Lower energy prices would also ease inflation pressure, which would generally be helpful for borrowers.

The reverse case, energy prices staying high or rising further, is not quantified in the document. The context it describes is the effective closure of the Strait of Hormuz from February 2026 (Budget 2026, para 3.2), with Brent crude up around 60% and UK wholesale gas up nearly 200% by October (Budget 2026, para 1.12). As of March 2026, 42% of businesses had at least half of their electricity prices fixed or hedged and 45% had done the same for gas (Budget 2026, Box 1.B). The rest are more exposed to any further rise.

The OBR's central case also has unemployment rising to 5.1% in the second quarter of 2027 before falling (Budget 2026, para 1.36), and business investment falling 0.5% in 2027 (Budget 2026, Table 1.1). A remortgage application in 2027 will be assessed in that environment.

What this means for a Thames Valley remortgage

Lenders refinancing an owner-occupier business mortgage look at three things: the property's current value, the business's ability to service the new payment from its profits, and the borrower's track record. The Budget's forecasts bear on the second of these.

Affordability will be tested at today's rates, not hoped-for ones. If your existing fix was agreed when rates were lower, the new payment may be materially higher. For an owner-occupier remortgage, indicative market rates currently sit in a band of roughly 6.0 to 8.0% depending on the business, the property and the loan to value, but the rate you are offered will depend on the market at the time you apply.

Cost pressures arrive at the same time. The National Living Wage rises 3.9% to £13.21 an hour from 1 April 2027 (Budget 2026, para 6.128), just as many 2027 fixes end. Lenders will look at your most recent accounts and management figures, so the profit cover they see will reflect those costs.

Some relief for retail, hospitality and leisure. Qualifying retail, hospitality and leisure properties in England get higher Small Business Rates Relief thresholds and a two-year real-terms freeze on bill increases from April 2027 (Budget 2026, paras 6.190 to 6.191). For a Reading high street business, that can help the numbers.

Illustrative example: a Thames Valley engineering business has a £750,000 owner-occupier mortgage on a five-year fix ending in September 2027. Every one percentage point on the new rate adds about £7,500 a year in interest before any capital repayment. If the business plans its remortgage in early 2027, it can show a lender current management accounts, test the payment at the upper end of the indicative band, and decide whether a shorter or longer fix suits its plans, rather than accepting whatever is on offer in the final weeks.

Timing your refinance

There is no forecast in the Budget that tells you when to fix. What it does tell you is that inflation is expected to be at its highest early in 2027 and to fall back by late 2028. That supports a few practical principles.

• Start early. Begin six to nine months before your fix ends. That gives time to compare a product switch with your existing lender against a full remortgage, and to get a valuation done without pressure.
• Know your early repayment charges. If the remaining charge is small, refinancing a few months early can be worth considering. If it is large, plan to complete on or just after the expiry date.
• Stress test the payment. Model the new payment at the top of the indicative range and check your profit cover still works. If it does not, you have time to reduce the loan, extend the term or change the structure.
• Choose the fix length deliberately. A shorter fix keeps options open if rates ease as the OBR expects inflation to fall; a longer fix gives certainty through a period of forecast uncertainty. The Budget does not settle that choice, and nor does anyone else.
• Avoid the reversion rate. Drifting onto a lender's variable rate after a fix ends can be expensive. A plan agreed in advance avoids it.

Key dates

• 28 October 2026: Budget 2026 published.
• First quarter of 2027: inflation forecast to peak at 3.8%.
• 1 April 2027: National Living Wage rises to £13.21; retail, hospitality and leisure business rates measures take effect in England.
• Second quarter of 2027: unemployment forecast to peak at 5.1%.
• Third quarter of 2028: inflation forecast to return to the 2% target.

Brought to you by Business Mortgages Broker

This article was prepared by Business Mortgages Broker, which arranges owner-occupier business mortgages for UK trading companies. Founder Matt Lenzie has 25 years in financial services, raising debt and equity, and has arranged around £400m of property finance. If your fix ends in 2027, read more about refinancing a business mortgage in Reading and what lenders will ask for.

Source: HM Treasury, Budget 2026 (HC 726), 28 October 2026. This article is general information, not tax or financial advice. Commercial Mortgages Reading is not authorised by the Financial Conduct Authority and does not give regulated advice or personal recommendations.