The Monetary Policy Committee (MPC) has voted to hold the Bank of England base rate at 3.75% at today’s meeting – a decision that had been widely anticipated given ongoing geopolitical tensions and the potential for renewed inflationary pressure.
All nine members voted to maintain the current rate, noting they remain “alert to the increased risk of domestic inflationary pressures”. CPI inflation eased to 3.0% in the year to January, down from 3.4% in December, although it remains above the Bank’s 2% target. The next inflation reading is due shortly.
Earlier expectations of two or three rate cuts this year had led to a reduction in swap rates, which underpin fixed mortgage pricing. However, that outlook has shifted. With markets now less certain on the path of base rate, and some suggesting the possibility of increases, swap rates have become more volatile and have moved upwards again in recent days.
Mortgage pricing has adjusted in stages. Initially, lenders responded to higher funding costs. More recently, repricing has also reflected capacity and service considerations. The largest lenders have attempted to move away from the most competitive positions in the market, although this has tended to ripple through the best-buy tables as others follow.
Commenting on the decision, David Wise of Fitch & Fitch said:
“A rate cut this month was always unlikely given the wider geopolitical backdrop and the potential impact on inflation.
While a hold will be disappointing for borrowers on variable or tracker rates, those on fixed-rate mortgages will see no immediate change.
With pricing currently moving in both directions, there is value in taking a considered approach. Securing a rate in advance provides certainty, and if the market improves, there is often flexibility to move to a lower rate before completion.”
Planning ahead remains prudent
For clients expecting to purchase or refinance within the next six months, early preparation remains important. Many lenders allow rates to be secured in advance, offering protection against further increases while retaining flexibility should conditions improve.
In a market where sentiment can shift quickly, clear advice and a structured approach remain key.