Bank of England Maintains Interest Rates, Hinting at Future Reductions
The Bank of England has decided to keep borrowing costs unchanged, providing a potential boost for UK households seeking mortgages. In a closely watched announcement, the nine-member Monetary Policy Committee (MPC) voted to hold the base rate at 3.75%, despite projections of weaker economic growth and lower inflation compared to previous forecasts from November.
Narrow Voting Split Signals Imminent Rate Cuts
The decision was made with a narrower than expected 5-4 split among MPC members, indicating that further reductions in borrowing costs are likely on the horizon. This marks the sixth time the committee has cut rates since mid-2024, suggesting a continued trend toward more affordable lending.
Andrew Bailey, the Bank's Governor, who supported holding rates, commented on the economic outlook. "We now think that inflation will fall back to about 2% by the spring. That's good news. We need to make sure inflation stays there, so we've held rates unchanged at 3.75% today. All going well, there should be scope for some further reduction in bank rate this year," Bailey stated.
Mortgage Market Reacts with Competitive Deals
Mortgage specialists have responded positively to the announcement, noting that attractive deals from January may continue to be available. Lorna Hopes, a mortgage specialist at chartered financial advisers Smith & Pinching, expressed surprise at the narrow margin of the vote. "In a big surprise, the nine members of the MPC voted by the narrowest of margins to hold the Base Rate unchanged. Nobody expected a rate change today, but having four members vote for an immediate reduction is a strong signal that cuts are edging closer," Hopes explained.
She added that many borrowers can now secure fixed rates well below four percent, with particularly appealing offers for those remortgaging or buyers with substantial deposits. David Hollingworth, associate director at broker L&C Mortgages, noted that as more lenders adjust their rates, others are likely to follow, potentially increasing competition in the market.
Stability for Borrowers Amid Economic Uncertainty
Sam Kirtikar, chief executive of The Mortgage Broker Group, highlighted the current stability for borrowers. "Those on fixed rates are completely insulated for now, while tracker and variable rate customers should see stability rather than relief. Pricing has already adjusted positively to the expectation of no change, so today's announcement is unlikely to move rates materially in either direction," Kirtikar said.
Fergus Allen, Head of Bridging at Clifton Private Finance, cautioned against waiting for further rate drops. "Waiting in the hope of further drops could mean missing out on the most competitive rates currently available," Allen advised, suggesting that borrowers act promptly to lock in favorable terms.
Overall, the Bank of England's decision provides a temporary reprieve for UK households, with experts anticipating more cuts later in the year, which could further ease mortgage burdens and stimulate the housing market.
