The Monetary Policy Committee (MPC) voted to keep the base rate at its current level of 5.25%, where it has now been since August 2023 after 14 rate hikes.
The bank said that monetary policy “will need to remain restrictive for sufficiently long to return inflation to the 2% target sustainably in the medium term”, in line with its remit.
However, its near-term forecast is that inflation will fall below target, which could mean a rate cut sooner rather than later.
John Fraser-Tucker, head of mortgages at broker Mojo Mortgages, said: “Several economists expect that the bank will start to reduce the base rate by the end of the year, with some estimating June, and others as late as September for the first rate cut. However, it’s impossible to predict for certain.”
What does the decision mean for borrowers?
Those with a fixed mortgage already know their rate is set in stone until the fixed period ends, regardless of any wider interest rate movements (or lack thereof).
Today’s decision to hold rates means that those on variable rates – such as trackers, discounts and standard variable rates (SVRs) – will also see no change to their pay rate.
New mortgage deals are usually affected by changes to the base rate, although they also fluctuate for other reasons, and we’ve seen rate rises in recent weeks.
Matt Smith, Rightmove’s mortgage expert, said: “After a few weeks of mortgage rate increases, we’ve seen early signs that this current run of rate increases has peaked and we’d expect that average mortgage rates will begin to trickle down again soon.
“The market is still assuming that the first base rate cut will happen in the summer, and today’s decision is unlikely to change that view.”
Alice Haine, analyst at Evelyn Partners, added: “Future rate cuts would certainly deliver respite for some mortgage borrowers, many of whom have been forced to get up to speed on all the options available in the market since the Bank of England first began its rate-hiking cycle.
“Extending the length of a home loan is becoming an increasingly popular route for some to get a foot on the property ladder, with one in five first-time buyers signing up for a mortgage term of more than 35 years in 2023, up from one in 10 in 2022.
“Mortgage rates retreated in the first few weeks of 2024 as hopes of imminent rate cuts heightened, but they have edged back up since then amid market revisions over the timing and number of rate cuts this year.”
