The base rate remains 4.5% amid concern about UK inflation and international uncertainty over US President Donald Trump’s on-off tariff policies.
Accompanying today’s announcement the Bank of England has warned economic and global trade uncertainty has “intensified”.
US trade tariffs and retaliation to the import taxes from the likes of the EU, has created uncertainty for countries, the Bank says.
Governor Andrew Bailey says "rate cuts are “on a gradually declining path” because “there’s a lot of economic uncertainty at the moment. We’ll be looking very closely at how the global and domestic economies are evolving.”
Inflation in the UK currently remains above the Bank’s 2% target at 3%.
Last evening the US central bank left interest rates unchanged for the second time in a row, while warning that economic uncertainty had increased.
The decision, which was widely expected, kept the Federal Reserve’s benchmark interest rate hovering around 4.3%, where it has stood since December. Forecasts released by the US bank also showed policymakers expect weaker growth and faster price inflation this year than they did just a few months ago.
Rightmove says "all eyes will be on Bank of England’s May decision"
The mortgage expert at Rightmove says this week’s decision to hold Bank of England base rate was a foregone conclusion – but that isn’t the case next time.
Matt Smith, Rightmove’s mortgage expert says “all eyes are on May’s decision where the current forecast is a second cut of the year. Since the last decision in February, average mortgage rates have trickled downwards slightly but pretty much stayed flat. We’re seeing lenders try to price competitively where they can to capture business during some of the busiest months of the year for home-moving.
However, there currently isn’t much wiggle room for lenders to offer cheaper rates, and hopefully a second cut can spur forward another wave of falling rates, and bring average rates closer to 4% rather than 5%. Some lenders may have also priced their products to manage volumes of new cases, as they try to protect their operational capacity at the start of the year to process as many completions as they can ahead of the Stamp Duty deadline. As the Stamp Duty deadline will pass soon, they could then release this capacity, and as a result we may see some lenders start to price even more competitively.”
Jason Tebb, president of OnTheMarket, says "last week’s decision to hold has a silver lining. While a hold in rates will be disappointing for borrowers, it does suggest a welcome level of stability which was not apparent when inflation was in double-digits and the Bank was forced to respond with consecutive rate hikes.
The trajectory for interest rates is downwards, but with global uncertainty and inflationary pressures these reductions may take longer to filter through than the markets previously thought. The base rate reductions we have seen since August have boosted activity and transactions in the market, and further cuts, when they come, will bolster confidence.”
Jeremy Leaf, north London estate agent and a former RICS residential agent, adds “worries about the fallout from imminent increases in national insurance and the minimum wage are certainly weighing heavily on some when considering taking on extra debt. However, activity has remained relatively resilient recently and prices, though softening a little, have held up well, particularly for houses.”