Base Rate Held Again - what this really means for mor...

Bank of England base rate has been held at 5.25% - where it has been for nine months.

The Bank’s monetary policy committee voted 7-2 to keep rates on hold: two members voted for a cut.

Meanwhile inflation is expected to hit 2% shortly, but rise again to 2.5% in the second half of this year.

And the labour market is expected to get tougher – with the unemployment rate hitting 4.8% in the middle of 2026 (this is down from 5% in the last forecast).

So what does this mean for mortgages?

Sarah Coles, head of personal finance at Hargreaves Lansdown, says: “It’s as much of a surprise as a Bank Holiday washout followed by a mid-week heatwave, so the decision to hold rates steady for another month won’t move the market. It’s the commentary that everyone will be pouring over.

“There were indications that rate cuts may not be as distant as some mortgage holders were fearing. The Bank played down inflationary risks, and drew out the growing signs of weaknesses in the economy – both of which point to the likelihood of a cut this summer.

“It remains to be seen whether this brings market expectations forward. If so, it could mean better news in the mortgage market.

“This will be music to the ears of remortgagers, who have endured some horrible hikes in recent weeks. Moneyfacts figures show the average two-year fixed rate mortgage rose from 5.56% at the end of January to 5.93% today.

“We can’t expect seismic shifts, but there’s likely to be some movement in the direction of 5%, as the market adjusts. It’s also a relief for anyone who shifted to a variable rate deal, many who would have been expecting a spring cut at the point when they made the decision.”

And what about the wider landscape?

Susannah Streeter, head of money and markets at Hargreaves Lansdown, has this take.

‘’This was the spring warm up act for the rate cut party set to kick off in the summer. Policymakers are showing signs of being more optimistic that unruly inflation looks more under control, and they appear a bit more prepared to bring an end to painfully high borrowing costs sooner rather than later.

“There’s been a shift in opinion around the table, with another member of the MPC, Dave Ramsden, voting for a rate cut, joining Swati Dhingra who has been vocal about the need for lower borrowing costs for some time.

“While the forecast for a lacklustre economy, and prospects of higher unemployment ahead, would ordinarily not give way to celebration, it’s being read as good news, because it means an interest rate cut in the summer is increasingly likely.

“The pound has fallen back against the dollar on the news, sparking a fresh run of enthusiasm among investors, helping the FTSE 100 climb sharply and extend its record run.

“The Bank of England is now expected to move much more quickly than the Fed in cutting rates, given the changing sentiment at the Bank.”

But Streeter says there is still room for caution.

“Even though inflation is soon expected to reach the target of 2%, the Bank is expecting that it will creep back up again to around 2.5% later this year.

“Given that the Bank says it wants to ensure that inflation returns ‘sustainably’ to target, the implication here is that a June rate cut may still be too close for comfort for some policymakers.

“Upcoming economic data will be scrutinised closely in the weeks to come, and certainly a June rate cut can’t now be ruled out, but August remains more probable."