The Bank of England opted to maintain interest rates at 4.5% yesterday citing mounting economic uncertainty fuelled by trade tensions linked to Donald Trump’s policies.
At its latest meeting, the central bank’s Monetary Policy Committee (MPC) voted 8-1 to leave borrowing costs unchanged.
The decision thad been widely anticipated but was more decisive than many expected. Swati Dhingra was the sole dissenter, advocating for a 25-basis-point cut. Notably, Catherine Mann, who had called for a larger 50-basis-point reduction in the previous meeting, aligned with the majority this time and supported holding rates steady.
The Bank reiterated its stance on monetary policy, emphasising a “gradual and careful approach” to potential rate cuts. However, it signaled a readiness to keep interest rates elevated for an extended period should inflationary pressures – particularly in wages and prices – prove persistent.
INDUSTRY REACTIONS
Iain McKenzie, Chief Executive of The Guild of Property Professionals, comments: “As expected, the market will have to wait a little longer for the second bank rate cut of the year.
“The Bank of England continues to walk a fine line, balancing efforts to control inflation with the need to stimulate economic growth.
“While the consensus forecast suggests the base rate will be around 3.75% by year-end, the Monetary Policy Committee is in no rush to reach that level, instead opting for a slow and measured approach to further rate cuts.
“The good news is that following the bank rate cut to 4.5% in February, there has been an increase of lenders that have introduced more competitive mortgage rates. For borrowers with a significant deposit, some fixed rates have recently fallen below 4%.
“Although the economy faces certain challenges in 2025, particularly from geopolitical tensions and lingering inflationary pressures – moderate GDP growth is still expected to drive strong levels of sales market activity and modest price growth throughout the year.”
NO SURPRISE JUST DISAPPOINTMENT
Kevin Shaw, National Sales Managing Director, LRG, says: “Yesterday’s decision by the Bank of England to hold interest rates was not a surprise, but it was a disappointment.
“At LRG we’ve had a strong start to 2025 but we are aware that the increased sales figures (year-on-year) are in part at least, due to a rush to beat the imminent Stamp Duty increase.
“Across the wider economy a loosening of monetary policy would have counter-balanced the recent fiscal tightening of which the Stamp Duty change is a component.
“With the ECB’s interest rate now at 2.5% after a further reduction last week, the gap between the Bank of England and the ECB rates is continuing to widen. Additionally, few mortgage deals are currently below 4%. The MPC was too slow to put rates up in 2022 and is increasingly looking too slow in reducing them now.
“The government’s favourite word seems to be growth, and yet in the wider economy growth seems nothing more than an aspiration. To seriously changes things up – specifically in housing delivery – monetary policy must align with the government’s objectives.
“The current level of interest rates act as a handbrake on future growth. Take the handbrake off and the housing market and economy will gain some momentum.
“With monetary policy having failed to mitigate the increased cost of buying a home (due to the rise in Stamp Duty), we are looking to next week’s Spring Statement for the Government’s next move.”
DELICATE BALANCE
Gareth Samples, Chief Executive of The Property Franchise Group, comments: “The Bank of England’s decision to keep the base rate unchanged comes as no surprise, given the delicate balance between controlling inflation and supporting economic growth.
“While further rate cuts are anticipated later in the year, it’s clear that the Monetary Policy Committee is taking a measured approach.
“Encouragingly, we are seeing a steady recovery in market activity. Sales volumes have returned to pre-pandemic levels, mortgage approvals are on track with long-term trends, and first-time buyer numbers have rebounded significantly, spurred on by improving affordability and the impending stamp duty changes.
“Mortgage rates have also eased, with some competitive fixed-rate deals now available below 4% for those with a strong deposit. This is providing buyers with greater confidence to move forward with transactions, which in turn is supporting moderate house price growth.
“While external pressures such as geopolitical uncertainty and inflationary risks remain, the fundamentals of the housing market remain robust. Moderate GDP growth is still expected to underpin sustained sales activity, and with buyer confidence improving, we anticipate a stable and positive year for the property market in 2025.”
ALL EYES ON MAY
Matt Smith, Rightmove’s mortgage expert, says: “Now that this expected interest rate hold is out of the way, all eyes are on May’s decision where the current forecast is a second cut of the year.
“Since the last decision in February, average mortgage rates have trickled downwards slightly but pretty much stayed flat. We’re seeing lenders try to price competitively where they can to capture business during some of the busiest months of the year for home-moving.
“However, there currently isn’t much wiggle room for lenders to offer cheaper rates, and hopefully a second cut can spur forward another wave of falling rates, and bring average rates closer to 4% rather than 5%.
“Some lenders may have also priced their products to manage volumes of new cases, as they try to protect their operational capacity at the start of the year to process as many completions as they can ahead of the stamp duty deadline. As the stamp duty deadline will pass soon, they could then release this capacity, and as a result we may see some lenders start to price even more competitively.”
FUTURE CUTS
John Phillips, Chief Executive of Just Mortgages and Spicerhaart, said: “Even the most avid supporter of rate cuts likely saw today’s decision coming – as did the financial markets with many already pricing in this outcome.
“As is often the case, it also mirrors yesterday’s decision by the Fed to keep interest rates unchanged amid similar economic uncertainty, slowing growth and higher inflation.
“We continue to hold our breath that future cuts are indeed coming, although like our US counterparts, the pace and frequency depends entirely on the economic outlook at home and abroad, and inflation dynamics – which in the UK remains sticky and highly volatile.
“Future cuts couldn’t come soon enough in a mortgage and property market that is still battling clear affordability challenges, not helped by the upcoming change to stamp duty thresholds.
“On top, we prepare for any potential surprises that may come in the Spring Statement next week. Thankfully, lenders continue to play their part to support borrowers and from our perspective, there is still appetite within the market with buyer registrations, valuation requests and mortgage appointment numbers all remaining consistent.
“It’s encouraging to see there is still a clear demand for advice and advisers will continue to play a pivotal role as clients try to navigate an ever-changing market landscape.”
ENCOURAGING FOR HOMEBUYERS
Nathan Emerson, Chief Executive of Propertymark, comments: “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%, 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.”
WELCOME STABILITY
Jason Tebb, President of OnTheMarket, says: “As widely expected, the Bank of England has voted to hold interest rates at 4.5%. With inflation rising to 3%, exceeding the Bank’s 2% target, caution prevailed.
“While a hold in rates will be disappointing for borrowers, it does suggest a welcome level of stability which was not apparent when inflation was in double-digits and the Bank was forced to respond with consecutive rate hikes.
“The trajectory for interest rates is downwards, but with global uncertainty and inflationary pressures these reductions may take longer to filter through than the markets previously thought. The base rate reductions we have seen since August have boosted activity and transactions in the market, and further cuts, when they come, will bolster confidence.”
WE NEED A ROADMAP
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% 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.”
TRADE TARIFF VOLATILITY
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%. 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.”
FRESH LENDING TARGETS
Simon Gammon, managing partner at Knight Frank Finance, said: “In recent weeks we have seen small rate reductions to some mortgage products.
“However, lenders are keener than ever to lend, so in addition to rate reductions we have also seen adjustments to underwriting criteria. In many cases this has increased banks’ generosity to lend and widened-out the availability of certain mortgages to borrowers who now fit the revised criteria.
“Additionally, the Spring marks the start of a new financial year for many of the lenders, which will mean fresh lending targets. All this can lead to an increase in competition and push further reductions in pricing.
“If financial markets see an increased likelihood of future base rate cuts, this could spur lenders on to reduce rates further. As we move into a traditionally busy time for the property market, there are some things to be positive about.”
