Base rate hold: Experts comment

Base rate hold: “Banks will have to continue to fight for every pound in savers’ pockets”

Commenting on today’s decision to hold the base rate, Katie Horne, savings expert at Flagstone comments:

Savers are currently awash with options to make inflation-beating returns on their cash. A vote to keep the base rate at 3.75% means competition among banks for savers’ cash will remain high. Banks will have to continue to fight for every pound in savers’ pockets in this higher-than-planned interest rate environment.

Traditionally by this point in the ISA cycle, banks remove products from offer and savers enjoy the last of their introductory bonus rates. This year, record numbers of Cash ISA rates are still on the market as banks cater to high demand from savers for ISA deals before the Cash ISA threshold falls to £12,000 next April.

Savers would be wise to act now, however. If inflation continues to rise, the margin between the inflation rate and top savings rates will tighten, making it harder to guarantee that inflation-busting return. Locking cash you won’t need for two or more years into some of the market’s best longer-term fixed-term deals could reduce that risk as you ride out this tumultuous market.

Commenting on the Bank of England holding rates at 3.75%, Jonathon Marchant, Fund Manager at Mattioli Woods says: “The Bank of England held rates at 3.75% today, as widely expected. With growth subdued and inflation still a concern, the case for patience remains intact. Markets had it right.

“What is more interesting is the direction of travel. Unlike the ECB, where a hike is being priced for the next meeting, the Bank of England has somewhat more room to manoeuvre. At 3.75%, rates are higher in relative terms, and the argument for cuts — when the time is right — is easier to make in London than in Frankfurt.

“That said, the UK is not insulated from what is happening in the Middle East. The closure of the Strait of Hormuz is a problem for everyone, and British consumers are already seeing higher prices at the pump. This has been reflected in soft retail sales numbers and anaemic GDP growth.

“For the Monetary Policy Committee, the bind is familiar. Policy makers were too slow in cutting rates and we are entering a difficult period for the economy. Inflation is being driven from outside, not from an overheating domestic economy. The acknowledgement of this is somewhat reflected in the vote split, with all but one member voting to keep rates on hold.”

Commenting on interest rate hold exposing ongoing confidence fragility, Daniel Austin, CEO and co-founder at ASK Partners, said: “The Bank of England’s decision to hold rates at 3.75% reinforces the ‘higher for longer’ reality facing households and property markets. While policymakers continue to signal potential cuts later this year, the recent uptick in inflation and renewed geopolitical tensions in the Middle East underline just how uncertain the path back to target remains. Any escalation that pushes up energy prices or market volatility could easily complicate the disinflation story, leaving confidence fragile among buyers and developers alike. Mortgage pricing has improved and further easing would be welcome, but it will take time for meaningful relief to filter through to household finances and borrowing costs.

“In the meantime, mainstream housing activity is likely to remain subdued, with capital continuing to favour structurally resilient, income-led sectors such as build-to-rent, co-living, logistics, storage and data centres, where persistent undersupply continues to support demand. A clearer downward trajectory for inflation, alongside rates moving sustainably lower, would be the real catalyst for unlocking stalled projects. Until then, disciplined, income-focused and lower-leverage strategies offer investors a pragmatic way to stay active while managing risk in an increasingly uncertain macro environment.”

 
Following today’s announcement that the Bank of England has held the base rate at 3.75%, please find below the latest reaction from Mortgage Advice Bureau, the UK’s leading tech-driven mortgage intermediary.

Ben Thompson, Director of Home Moving Strategy, Mortgage Advice Bureau:

“The Bank of England holding the base rate brings a welcome sense of stability at a time of ongoing uncertainty. While it won’t lead to an immediate drop in mortgage rates, it does support continued competition among lenders and gives borrowers a clearer backdrop to plan against.

“For those remortgaging or moving home, it’s less about sudden change and more about greater certainty and the ability to plan ahead. The biggest opportunity, however, could be for aspiring buyers. Our research shows 47% of renters would buy immediately if mortgage payments matched their rent, and with rates stabilising, that gap is starting to narrow in some cases.

“Despite this, hesitation remains – with 41% still waiting for a ‘sign’ to act. This latest decision could help provide that nudge by removing a layer of uncertainty. Ultimately, the challenge now isn’t just affordability, but awareness. Many buyers are closer to homeownership than they think, and clear, expert advice will be key to helping them take that next step.”