Feb

Bank of England holds interest rates at 3.75% as a Spring cut looms

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Bank of England holds interest rates at 3.75% as a Spring cut looms

The Bank of England has kept interest rates at 3.75%, leaving borrowing costs at their lowest point since February 2023.

However, experts are predicting that rate reductions will be seen in the Spring.

The decision by the Bank’s Monetary Policy Committee was widely anticipated by economists and financial markets.

Most forecasts had pointed to a hold, particularly after December’s drop from 4%, which came amid mounting concern over rising unemployment and subdued economic momentum.

Policymakers backed the decision by five votes to four, a narrower margin than many analysts had predicted, suggesting growing support within the committee for loosening policy sooner rather than later.

Andrew Bailey, the Bank’s governor, signalled the direction of travel in clear terms, stating that further cuts are now ‘likely’.

Property sector reaction

Steve Cox, the chief commercial officer at Fleet Mortgages, said: “In the buy to let market, pricing has continued to trend downwards during January as lenders, including Fleet, moved early to price competitively and secure business.

“We made further reductions to our own product range last week and introduced new 65% LTV products.

“However, with swap rates having crept up in recent weeks, there’s now a case for landlords to act sooner rather than later.”

Simon Gammon, a managing partner at Knight Frank Finance, said: “The Bank holding rates was widely expected, but the fact that four of the nine members of the Monetary Policy Committee voted to cut is a positive sign.

“Strong economic figures released over the past fortnight had prompted many of the larger lenders to raise mortgage rates in recent days, but this decision should reinforce a period of pricing stability.

“The best fixed rates have not moved higher and still sit at around 3.5%, but there has been considerable repricing across the middle of the market.”

Adrian Moloney, the group lending distribution director at Precise, said: “While many borrowers will have been hoping for an interest rate reduction, a period of stability should at least provide some reassurance and help households plan with greater confidence.

“Despite the base rate remaining unchanged, there is good news on affordability – with positive movement on mortgage rates and more flexible products coming to market, to help more home buyers and movers make the leap this year.”

Nick Leeming, the chairman of Jackson-Stops, said: “Today’s decision to hold interest rates comes as no surprise.

“Two consecutive cuts would have been unusual given the Bank of England’s cautious approach amid rising inflation, which unexpectedly climbed to 3.4% last month.

“December’s rate cut was the latest in a series of reductions last year, reflecting the MPC’s careful balancing act between slow economic growth, high wages and rising unemployment.”

Jonathan Samuels, the CEO of Octane Capital, said: “No news is good news in the grand scheme of things, and today’s decision to hold the base rate provides welcome consistency for both lenders and borrowers, particularly given the fact that inflation climbed in December and remains higher than the Bank of England’s 2% target.”

Nathan Emerson, the CEO of Propertymark, said: “Today’s decision to hold interest rates reflects the Bank of England’s cautious approach in the face of ongoing economic uncertainty.

“While we would ultimately welcome lower borrowing costs, stability at this stage gives buyers and sellers clarity about the cost of borrowing and allows the market to continue adapting.”

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