Interest rates held at 4.5%: experts respond

Bank of England expected to hold rates as inflationary pressures persist

 

Lale Akoner, Global Market Analyst at eToro, says: “With the BoE set to announce its interest rate decision today, we expect rates to be kept unchanged at 4.5% as policymakers balance persistent inflationary pressures against stagnant and near-recession growth.

“While markets had been pricing in rate cuts later this year, recent inflation surprises and mixed economic data suggest the BoE will maintain a cautious approach, emphasising data dependency in its forward guidance. We are keeping an eye on embedded inflation, particularly from rising wages and service-sector price pressures, as well as uncertainty from US tariffs, all of which require a longer period of restrictive policy.

“The minutes of the meeting will likely emphasise a meeting-by-meeting approach, reinforcing uncertainty over when the first cut will occur, leaving markets looking for further clarity in the coming months.”

 

Scott Douglas, Senior Director, Head of Debt Advisory at international corporate finance firm Centrus commented:

 

“The Bank of England is almost certain to keep interest rates on hold this Thursday, following February’s 25bps rate cut. Key factors pushing this decision include rising inflation, currently at 3% and well above the 2% target, and private sector wage growth which stands at 6.2% – showing little sign of slowing. Adding to this heightened geopolitical uncertainty.

On the other hand, January’s GDP contraction raises concerns about potential economic slow down, the BoE is expected to stick to its gradual and measured approach. Meanwhile, some market analysts believe there is still room for another rate cut in May.”

 

No Bank of England rate cuts imminent: deVere CEO

 

The Bank of England is unlikely to cut interest rates anytime soon, says the CEO of one of the world’s largest independent financial advisory and asset management organizations.

 

 

The prediction from deVere Group’s Nigel Green comes as the Bank of England’s Monetary Policy Committee (MPC) announced it has voted to hold the base rate at 4.5%, following a cut at February’s meeting.

 

 

He says: “Those hoping for imminent rate relief are, we believe, in for disappointment.

 

 

“Inflation, which unexpectedly rose to 3% in January, remains a concern. More importantly, wage growth is proving stubborn, holding at 5.9%—far too high for policymakers to feel comfortable about cutting rates.

 

 

“The conditions for rate cuts are not in place. Wage growth at this level means consumers are still spending, businesses are still facing higher costs, and inflation risks remain embedded. Investors need to adjust accordingly.”

 

 

Financial markets have been pricing in a series of rate cuts this year, but that optimism is misplaced.

 

 

“Investors who assumed a quick return to cheaper borrowing costs will need to rethink their strategies,” notes the deVere Group CEO.

 

 

“Should this be the case, sectors that had rallied on the prospect of lower rates, particularly those that rely on credit-fuelled expansion, could now face renewed pressure.

 

 

“Real estate, tech, and high-growth companies are particularly exposed. Meanwhile, defensive stocks, high-yield assets, and dividend plays remain attractive in a higher-for-longer rate environment.”

 

 

He continues: “Currency markets, too, will respond. If the UK keeps rates higher for longer while other economies move towards easing, the pound could strengthen—a potential headwind for exporters but an opportunity for those with overseas investment interests.”

 

 

For businesses and households, borrowing costs are not about to come down, forecasts deVere.

 

 

Mortgage holders, especially those on variable rates or due to refinance, should prepare for continued elevated repayments. Hopes that cheaper mortgages are just around the corner are likely to be misplaced. Until wage growth slows, the pressure on housing affordability will persist.

 

 

Nigel Green goes on to add: “We believe the most important number right now is not inflation—it’s wage growth. That’s the real roadblock to lower rates.

 

 

“For investors and businesses alike, this is the single most important metric to watch. Until wage growth shows clear signs of slowing, the Bank of England will not feel comfortable cutting rates—and nor should it.”

 

 

He concludes: “It seems optimism that the Bank would cut rates throughout the year is likely to be misplaced. Wage growth is keeping the door to rate cuts firmly shut, we expect.”

 

UK interest rates held at 4.5% but further cuts to come

 

Rob Morgan, Chief Investment Analyst at Charles Stanley

Despite weak economic growth and some signs of price pressures fading the Bank of England has kept rates on hold at 4.5%. That’s not a huge surprise given the climate of uncertainty. A cloudy domestic inflation picture, potential fiscal changes from the Chancellor, and a possible global trade war present significant complexities for monetary policy.

The issue closest at hand is that inflation is still a problem. Despite weakness indicated by industry surveys, official measures of the UK jobs market still show a more robust picture with strong wage growth. This is feeding into services inflation, which has re-accelerated to 5% year-on-year.

What’s more, it’s still far from clear how businesses are reacting to the increased costs of National Insurance contributions in April. A large portion intend to raise prices in response, which will further contribute to inflationary pressure. Waiting a little longer to see what permutation of higher prices, fewer jobs and reduced profits the economy is left with as this unfolds seems appropriate.

The Bank is also mindful the Chancellor’s Spring Statement is just days away and any fiscal factors coming into play can be digested by its next meeting. By then the full geopolitical picture should be taking shape more clearly too. With a capricious President Trump looking to implement tariffs there is the potential for global inflationary pressures to build rapidly – even if the UK escapes much of the proximate trade war damage.

Overall, with an array of moving parts the Bank judged back-to-back cuts inappropriate, but there were signals that interest rates will be reduced again later this year. One of the nine committee members voted to cut, a count that will surely increase by the time of the next meeting in May. With inflation showing some stubborn tendencies but reasonably well behaved, concerns about growth could well come to the fore by this point.

With Rachel Reeves poised to make some spending cuts to restore fiscal headroom, as well as possibly flagging some tax rises, there is going to be growing pressure on the BoE to reduce rates further and it seems likely it will stick to its slow and steady approach of cutting at a roughly quarterly pace over the course of 2025.

 

What does it mean for savings and mortgages?

 

Interest rates remaining fairly elevated is good news for savers who have seen rates pegged back over the past year. However, today’s decision will make little difference as banks set rates according to expectations, which haven’t altered. Two or three more cuts are still anticipated before the year end.

It may therefore be an opportune time to consider fixed rates if you are willing to forego access as it could allow you to lock in higher rates for longer. An active approach using a savings platform such as Charles Stanley Direct Cash Savings can help make the most of your money.

For home owners, fixed-term mortgage rates have been falling a little over the past month or so as expectations of interest rate cuts have solidified. Today’s decision does not alter that picture, although those coming to the end of a cheap five-year deal will need to budget for much higher borrowing costs once they refinance.

 

“Base rate holds at 4.5% – Mortgage Advice Bureau reacts”

Ben Thompson, Deputy CEO, Mortgage Advice Bureau:  

 

“The Bank of England’s decision to hold the base rate at 4.5% shouldn’t give prospective and current homebuyers much cause for concern. A small rise in inflation and a degree of global economic uncertainty calls for a cautious approach, and many people will no doubt feel a sense of relief that the Bank is playing it safe.

 

“With the Spring Budget almost upon us, all eyes are now firmly on the Chancellor to explore alternative avenues to foster a more accessible housing market and make homeownership a more affordable prospect for aspiring first time buyers.

 

“Whether you think you’re able to buy now or further down the line, speak to a mortgage adviser. With their expert guidance and support, you can get mortgage ready sooner than you think, and secure the right deal for your financial circumstances.”

 

 

Paresh Raja, CEO of Market Financial Solutions, said: “The past six months have shown that predicting base rate movements is never straightforward. The hope had long been that once inflation was brought under control, the Bank of England would rapidly reduce rates. But this was over simplistic; it overlooked the myriad other factors at play – economic and politically, domestically and internationally, the landscape is constantly evolving, and while further cuts to the base rate are still expected this year, it is likely that the central bank will remain cautious. Today’s decision reflects that.

 

 

“Where the property and mortgage markets are concerned, it is important that neither complacency nor inertia are allowed to set in. Sitting tight in the assumption that rates will tumble could prove risky. With data showing that house prices and buyer demand are on the rise, the market will clearly move ahead. So, the focus from lenders when serving brokers and borrowers has to be on delivering products and services that give clients the confidence to act in the here and now, with flexibility and optionality remaining key qualities in achieving this.”

 

Hamish Martin, Partner at LAVA Advisory Partners, said: “While the base rate’s been held at 4.5%, it remains likely that there will be further cuts this year, even if the rate at which those cuts come will now be slower than most had expected at the start of the year. Inflation is still challenging, while Trump’s tariff-heavy policies are also giving the Bank food for thought.

 

 

“That said, such a divergence from the European Central Bank’s rate of 2.5% makes the Bank of England rate start to look circumspect given the similar economic conditions – and with growth forecasts having been revised downwards, I’d expect to see some gradual reductions in the base rate throughout the year to help stimulate the economy. To that end, next week’s Spring Statement, when the Chancellor will be providing an update on the state of the UK economy, may in turn encourage bolder action from the Bank of England when it next meets in early May.”

 

 

 

 

Darrell Walker, Group Sales Director at ModaMortgages, said: “The market widely expected a hold today, and with analysts forecasting at least a 0.5% reduction in the base rate by the end of 2025, this decision is unlikely to slow activity.

 

 

“Indeed, while borrowing costs remain a challenge for some, landlords haven’t stopped investing. Instead, they are being pragmatic; they have recalibrated, adjusting both their budgets and the types of assets they are targeting. We expect this trend to continue following today’s news, and we have seen many landlords using the current period of stability to diversify their portfolios, with HMOs and MUFBs proving particularly popular.

 

 

“As ever, speculation is rife as we head into next week’s Spring Statement and, beyond that, the start of a new tax year. With this in mind, rather than focusing on when the next cut might come, lenders should prioritise agility, ensuring brokers and their clients have both the products and support they need to get deals over the line.”

 

Lily Megson, Policy Director at My Pension Expert, said, “The ongoing geo-political turbulence coupled with domestic tax reforms continue to fuel economic uncertainty; the Bank of England has clearly decided not to throw petrol on the flames.

 

“Whilst the decision carries a hint of stability, it does little to ease the financial strain on savers. The cost-of-living crisis lingers, and with inflation remaining elevated – with possible increases announced next week – the value of Britons’ hard-earned savings continues to erode. At the same time, uncertainty around future policy changes makes it increasingly difficult for people to plan their long-term finances with confidence. With no clear direction on savings, pensions, or retirement support, many will be left second-guessing their next steps.

 

“While the Central Bank has avoided adding fuel to the fire, the government must now take decisive action. Simply waiting for interest rates to cool inflation is not a plan. Savers need consistency and support to restore confidence in their financial future.

 

“With the Chancellor’s Spring Statement fast approaching, we can only hope for a renewed focus on ensuring people can save enough for a secure financial future. A good place to start would be improving access to financial education and independent advice because at the moment, too many people are left without the guidance they need to face the current uncertainty.”