Bank of England hold Base Rate at 4.5%

The Bank of England’s Monetary Policy Committee (MPC) Doves came out on top today, voting 8-1 to hold the Bank Base Rate at 4.5%. One MPC member voted for a 0.25% reduction in the rate.

This coincides with the US Federal Reserve’s decision yesterday to also maintain their rate at the range of 4.25 to 4.5% due to potentially inflationary economic proposals. The current global uncertainty around tariffs and significant German reform of its fiscal rules is maintaining inflationary pressure amongst Western economies.

However, due to Rachel Reeve’s Autumn Budget, the UK’s growth forecasts have weakened along with employment intentions dampening out external inflationary pressures.

Twelve-month CPI inflation increased to 3.0% with an expectation for this to increase to a peak of 3.75% by Q3 2025 and then fall back.

The MPC indicated that should weak UK demand continue longer term compared to supply this could give more wriggle room for an easing of monetary policy subject to global inflationary forces.

The MPC summary stated:

“Median expectations are for a further 75 basis points of Bank Rate cuts this year. Market contacts emphasised elevated economic uncertainty, with perceptions that the near-term distribution for Bank Rate was skewed towards fewer cuts.

“UK-weighted global GDP was estimated to have grown by 0.5% in 2024 Q4, in line with the projection in the February Monetary Policy Report. Since the MPC’s February meeting, there had been a further increase in geopolitical and global trade policy uncertainty, and it was likely that this elevated uncertainty would persist. The US administration had imposed tariffs on some goods imports from some of its trading partners, as well as on all steel and aluminium imports, to which some governments had responded with tariffs of their own.

“The Committee judged that the consequent risks around the near-term outlook for activity in a number of advanced economies, including the United Kingdom, remained to the downside. The overall effect on UK inflation was less clear at present, and would depend on where other countries’ trade policies settled and how these transmitted through different economic channels, including exchange rates. The Committee noted that this was a rapidly evolving situation, which it would monitor closely and assess further in the May policy round.”

Industry reaction to Bank of England holding interest rates

Thomas Cantor, co-head of Short-Term Finance at West One Loans, said: “It is no surprise that the Bank of England has decided to hold rates given that inflation continues to prove more persistent than thought with CPI measuring 3% in January 2025 and the latest figures from the Office for National Statistics also showing that growth in earnings has held firm.

“The Bank of England is also forecasting inflation to continue to rise to 3.7% this year. With these levels clearly being higher than the target of 2%, largely driven by energy prices, I think their decision was really made for them today.”

Understandably disappointed

Stephanie Daley, Director of Partnerships at mortgage advisor Alexander Hall, said: “The nation’s homebuyers will be understandably disappointed that interest rates have remained frozen at 4.5% today, however, the landscape has improved dramatically in recent months and we have seen mortgage pricing track downwards since the start of the year.

“Both those looking to purchase, as well as those coming to the end of a fixed-term, will find themselves far better off today versus even this time last year and we expect the picture to continue to improve as a hold on the base rate brings ongoing stability to the market.”

Ensure market stability

CEO of specialist lender Octane Capital, Jonathan Samuels, said: “No news is still good news for the nation’s borrowers and whilst they will have been hoping for a second cut this year following the reduction seen in February, it’s probably a case of wishful thinking given that inflation has reared its head again in recent months.

“A hold on the base rate will, at least, ensure that market stability continues to build over the coming months as buyers continue to act with the reassurance that mortgage rates are unlikely to climb.”

Property investors were hoping for a rate cut

Alpa Bhakta, CEO of Butterfield Mortgages Limited, said: “While property investors were hoping for a rate cut, the economic climate and property investment outlook are in a much better position than in previous years.

“It’s important to remember, the upcoming Spring Budget and new tax year could influence market conditions and introduce some uncertainty. As such, it’s essential for lenders to stay proactive, supporting borrowers and brokers, to ensure the market can capitalise on its strong start to the year.”

Reassuring to see base rate held

Nathan Emerson, CEO of Propertymark, said: “Today’s news will likely prove encouraging for many people who are hoping to progress on the housing ladder. It is reassuring to see the base rate held, especially considering the many national and international factors that continue to shape the global economy currently.

“With inflation currently standing at 3 per cent, which is above the initially targeted rate by the Bank of England, it important there is very careful consideration over the forthcoming months to keeping the economy heading on the right pathway. Higher interest rates can of course affect mortgage products that are on offer, so it would always be welcome to see base rates lower when the wider economy fully allows.”

Volatility arising from the decisions by the US to raise trade tariffs

Jeremy Leaf, north London estate agent and a former RICS residential agent, says: “As expected, interest rates have remained at their 18-month low of 4.5 per cent. It seems concerns over the direction of travel for inflation, as well as volatility arising from the decisions by the US to raise trade tariffs, have outweighed the desire from the MPC to arrest the recent fall in GDP and confidence generally.

“Worries about the fallout from imminent increases in national insurance and the minimum wage are certainly weighing heavily on some when considering taking on extra debt. However, activity has remained relatively resilient recently and prices, though softening a little, have held up well, particularly for houses.”

Key question is whether Reeves and the MPC will act to support growth

Amy Reynolds, head of sales at Richmond estate agency Antony Roberts, says: “The Bank of England’s decision will be closely watched and the minutes of the meeting scrutinised. Rates were expected to remain at 4.5 per cent but any suggestion of an imminent cut would provide relief to buyers, particularly those relying on high-value mortgages.

“A clearer roadmap for rate reductions would help restore confidence and encourage market activity. There has been much talk of rate reductions but fluctuating inflation and other concerns are holding the rate-setters back.

“The key question is whether Reeves and the MPC will act to support growth – or introduce more hurdles for the property market to navigate.”