The Bank of England (BoE) has voted to hold the base rate at 4.75%.
The Monetary Policy Committee (MPC) voted 6 -3 to maintain the base rate at its meeting on 18th December.
This move followed the MPC’s decision to lower the rate to 4.75% in November, marking the first time the rate has fallen below 5.00% since the bank chose to raise interest rates above the 5.00% threshold in June 2023.
The decision aimed to support economic growth amid signs of slowing inflation, which recently eased below the BoE’s target of 2% to 1.7%, down from a peak of 11.1% in October 2022.
Reaction:
Nicholas Mendes, mortgage technical manager and head of marketing at John Charcol:
“The Bank of England’s decision to hold the base rate at 4.75% comes as no surprise, given the challenging economic landscape the MPC is navigating.
“While October’s Budget has provided a short-term boost to the economy, it has also introduced new pressures that are likely to keep inflation elevated for longer than previously anticipated.
“A few weeks ago, Governor Andrew Bailey highlighted these complexities, stating: ‘The biggest issue now is the response to the National Insurance change; how companies balance the mixture of prices, wages, the level of employment, what is taken on margin, is an important judgement for us.’
“His remarks reflect the ongoing uncertainty surrounding the interplay of fiscal measures and business responses, which are critical factors for the Bank’s future decisions.
“Both the OECD and CBI have warned that inflation will remain stubbornly above the Bank’s 2% target until at least 2026, with projections of 2.7% in 2025 and easing only slightly to 2.5% the following year.
“Rising public spending and borrowing, along with increased consumer demand, are key contributors to these inflationary pressures, particularly in sectors like hospitality and retail.
“Today’s announcement to hold rates steady reflects this cautious sentiment.
“With GDP growth expected to reach up to 1.7% in 2025 before slowing again to 1.3% in 2026, the economic outlook remains fragile.
“Base rate forecasts suggest gradual cuts over the coming years, potentially reaching 3.5% by early 2026, but these adjustments are expected to be incremental rather than swift.
“Further comments from Governor Bailey reinforce the market’s sentiment regarding the pace of rate reductions.
“When questioned about the November economic forecast, which anticipates four 0.25% cuts next year, Bailey confirmed: ‘We always condition what we publish in terms of the projection on market rates, and so as you rightly say, that was effectively the view the market had.’
“Pressed further on whether the MPC would carry out four such cuts under the Bank’s central forecast for 2025, Bailey replied, ‘Yup.'”
Nathan Emerson, CEO of Propertymark:
“With many national and international factors continuing to shape the global economy, the Bank of England is understandably taking a cautious path until they can be confident that they are able to safely reduce interest rates back.
“It has been encouraging to see interest rates reduced across recent months, but the base rate can only be reduced if all factors allow.
“High interest rates can of course affect borrowing for many people, especially those stepping onto the housing ladder, but it’s important there is sensible balance to keep the overall economy secure and workable for all.”
Ben Allkins, head of mortgages and protection at Just Mortgages:
“It’s safe to say today’s decision was widely expected and I think even the most avid supporter for rate cuts would say it’s probably the right call.
“The positive to take is that the path of interest rates in 2025 is still set to move downwards.
“Of course the central bank will have to carefully balance the uptick in inflation with an economy showing signs of stress. That’s without considering the potential of any external shocks too.
“Speaking with our brokers and the lenders we work with, the general consensus for 2025 is positive.
“There’s no doubt that clear challenges will absolutely remain, particularly around affordability.
“At least a hold on the base rate brings some stability which is always well received by the markets and by swap rates.
“This may give lenders some leeway to make movements as they look to build their pipeline heading into the new year.
“Brokers will continue to play a fundamental role in helping clients navigate a challenging and ever-changing market.
“As a result, they need to have a clear presence in their local market, educating clients and highlighting the opportunities that are still available.”
Rob Clifford, chief executive of Stonebridge:
“The Bank of England’s Monetary Policy Committee (MPC) has played Scrooge this Christmas, refusing to deliver the gift of a rate cut for borrowers.
“However, that shouldn’t come as a surprise. While inflation has eased significantly from its peak, its persistent stickiness made a December cut highly unlikely.
“That said, the reasons are understandable. Business confidence is wavering and the economy contracted in October which clearly impacted on this decision today.
“Despite this, we still expect the MPC to act decisively in February, delivering a quarter of a percent cut to kick-start the economy.
“We believe there will be at least two further rate cuts in 2025, taking the benchmark rate to between 3.5% and 4%.
“This typically results in more competitive mortgage pricing and lower monthly repayments for borrowers, bringing much-needed benefits to millions of households across the country.
“We should never forget that we live and breathe this.
“For everyone else grappling with what this means for their own unique personal circumstances, MPC decisions and what they actually mean for mortgage rates can be baffling.
“The value in providing timely reminders to customers that they have a subject matter expert on-hand cannot be overstated.”
Melanie Spencer, sales and growth lead at Target Group:
“A hold was always the expected outcome of this latest meeting, especially given the recent news on inflation.
“While the uncertain outlook for inflation will remain a worry for the Bank of England, the overriding feeling is that we will still see a return to cuts in 2025.
“It will be interesting to see how swap rates react to this stability and whether it provides lenders with the scope to make even small changes to pricing.
“We have seen some movement in recent weeks as swaps continue to stabilise post-Budget and the hope for many is that this trend will continue into Q1, with a potential cut in February’s meeting.
“With the change to stamp duty relief coming at the end of Q1, this is likely to encourage activity in the early part of the year – although with transaction times as they are, it is likely that many will have already missed the boat.
“However, with consumer demand expected to increase as rates and market conditions improve, there’s no question that technology adoption and integration will need to play a key role – whether that’s driving efficiencies in application and decision-making, or bringing product or criteria innovations that help answer the demands of the market.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“The lack of movement in base rate is not surprising given recent increases in inflation and wages as the Bank of England wants to see some stability before taking what it thinks is risks with the economy.
“However, as far as the property market is concerned, even a small cut in base rate would be welcome not just for those on fixed-rate mortgages who are facing considerable increases in their loans when they come to remortgage but also first-time buyers who are the engine of the market, wanting to escape from high rental levels and take advantage of reduction in Stamp Duty before 1st April.
“A reduction in mortgage rates is always helpful as it improves activity, which is good not just for those contemplating moving but for the wider economy.”
Mark Harris, chief executive of mortgage broker SPF Private Clients:
“While it is no surprise that the Bank of England maintained interest rates at 4.75% given the recent rise in inflation, borrowers will still be disappointed.
“The trend in new mortgage pricing is downwards but mortgage rates are likely to continue to yo-yo over the next three months.
“Swaps have been gradually falling for a month but all those falls have been wiped out over the past three days.
“It is only when we start getting regular base rate cuts that the market will react favourably and swap rates will fall.
“Until then swaps will continue to fluctuate as much as we have seen over the past 12 months, which makes it harder for lenders to consistently offer lower mortgage rates.
“Those looking to remortgage in coming months should plan ahead as much as possible, speaking to a whole-of-market broker ideally six to seven months before their current deal ends to reserve a rate.
“Should rates rise by the time you take out your mortgage, you are protected from those increases, but if rates fall, you can ask your broker to review what is available nearer the time.”
Amy Reynolds, head of sales at Richmond estate agency Antony Roberts:
“The Bank of England was widely expected to hold interest rates steady this month.
“While stability in rates is welcome after months of sharp increases, borrowing costs remain high compared to the pre-2022 norm, which continues to challenge affordability for many buyers.
“For the property market, this ‘higher for longer’ rate environment means a slower pace of transactions and a greater emphasis on realistic pricing.”
Stephanie Daley, director of partnerships at Alexander Hall:
“The Bank of England’s decision to hold interest rates at 4.75% comes as no surprise, given the current economic climate.
“With inflation rising to 2.6% in November – the second consecutive monthly increase – and core inflation climbing to 3.5%, there’s clear upward pressure on prices.
“For borrowers and homeowners, stability in the base rate this month goes hand in hand with the expectation of a very slow downward movement in the base rate.
“Forecasts still expect future base rate drops next year but in the short term the sustained inflation trend will likely keep lenders vigilant and mortgage pricing reflective of longer-term uncertainties.
“It is essential for both home movers and remortgage clients to seek advice in order to navigate these challenges and find solutions that best suit their financial situations in what still remains a very changeable market.”
Jonathan Samuels, CEO of Octane Capital:
“Whilst it’s been a largely positive year for the property market, we simply haven’t seen the base rate reductions that many had hoped for and, as a result, higher mortgage rates have remained a challenge for many borrowers.
“We’ve seen inflation rear its head again in recent months and so a hold was always going to be on the cards today.
“However, the silver lining is that we remain in a far more positive place than we did even a year ago and buyers should continue to act with a greater degree of confidence when traversing the market, as they have done for much of this year.”
Marc von Grundherr, director of Benham and Reeves:
“Not the Christmas cracker that many homebuyers were hoping for but not quite a lump of coal either and today’s hold on the base rate will do little to impact the current trajectory of the property market, particularly given the stamp duty deadline in place.”
Robert Sadler, vice president of real estate at Excellion Capital:
“When the base rate was cut back in November, there was wide expectation that it would be the first of at least two cuts before the end of the year, but at Excellion we sensed that the market response to Labour’s inflationary Autumn Budget would in fact mean that any further base rate cuts in 2024 were highly unlikely.
“With recent rises to inflation and the 5-year SONIA swap rate up more than 30 basis points in the past week alone, investors are desperately holding out for some kind of relief.
“Sadly, it hasn’t come today.
“As a result, on the residential side, we’re likely to see mortgage rates increase, and on the commercial side we’re looking at heightened investor caution driven by increased borrowing costs.
“For the Government itself, this is also bad news as it means their ambitious housebuilding targets are now even further out of reach than they were before because this hold will likely mean projects cost more and move more slowly.
“At a time when the UK needs an environment of ambition and calculated risk taking, this base rate decision is likely to foster one of caution and constraint.”
John Fraser-Tucker, head of mortgages at mortgage broker Mojo:
“The Bank of England’s decision to hold the base rate at 4.75% isn’t surprising, but it does offer some stability as we head into 2025.
“For first-time buyers, there’s a clear window of opportunity right now.
“The current Stamp Duty relief allows purchases up to £425,000 without paying any tax, but this ends on March 31st, 2025.
“After this date, the threshold drops significantly to £300,000, which could mean thousands more in tax for many buyers, especially in high-cost regions like London, the South East, and East of England.
“What makes this period even more interesting is the upcoming changes for landlords. From April 2025, an additional 2% Stamp Duty will be imposed on second homes.
“This could dramatically reduce competition in the property market, creating a more favourable environment for first-time buyers.
“While the base rate remains unchanged, these market dynamics present a unique opportunity. Fewer landlords competing for properties, combined with the existing Stamp Duty relief, could make this an ideal time for those looking to buy their first home.
“For existing homeowners and those with variable-rate mortgages, the rate hold provides some predictability.
“After a year of significant economic shifts, this stability might offer some welcome breathing room.
“My advice? If you’re considering buying, don’t wait. Speak to a mortgage broker, understand your options, and be prepared to move quickly. These conditions won’t last forever.”
Nick Leeming, chairman of Jackson-Stops:
“Today’s decision reflects the ongoing challenge of balancing accelerated pay growth with persistent inflation.
“This cautious approach is understandable as the Bank seeks more clarity and fiscal headroom before considering a reduction in rates.
“Rates rise much quicker than they fall but the Bank of England must avoid cutting too soon and undermining the progress being made on inflation.
“The macroeconomic environment remains complex, with the Autumn Budget introducing tougher measures for businesses, potentially leading to higher costs for consumers.
“However, the Bank’s decision to hold rates steady provides a degree of stability, which is crucial for both the economy and the property market.
“For the property sector, mortgage customers will continue to carefully evaluate their financial options and long-term plans.
“Stability in Government and economic growth is essential to bolster buyer confidence, which in turn can drive increased sales and completions.
“As we look ahead, a steady economic footing will be key to enabling the Bank of England to gradually reduce rates.
“Across the Jackson-Stops network we expect house prices to remain on par with 2024 and for Q1 to be particularly active as buyers strive to complete transactions before the end of current Stamp Duty incentives.
“While the immediate impact of the rate decision may be mixed, the longer-term outlook remains cautiously optimistic.
“A stable economic environment will ultimately support a healthier property market, benefiting both buyers and sellers.”
Gareth Lewis, managing director of specialist lender MT Finance:
“The MPC’s decision to maintain interest rates at their current level is a measured response to the complex interplay of inflation, economic growth, and market stability.
“By holding rates, the MPC is signalling continued vigilance regarding inflationary pressures while providing a sense of stability for businesses and investors.
“The decision suggests that while progress has been made in managing inflation, the economic environment remains too uncertain for immediate rate reductions.
““For the property market, this represents a moment of strategic patience. Lenders and borrowers can continue to operate within a predictable framework, allowing for measured investment and development strategies.”
Simon Webb, managing director of capital markets and finance at LiveMore:
“No third time lucky this month for borrowers on standard variable rates (SVRs), trackers or first-time-buyers hoping for a reduction in the Bank Rate again.
“After the increased borrowing announced in the Autumn Budget that set markets in a flurry, and November’s repeated rise in inflation, it’s no surprise that the MPC voted against a base rate drop – for now at least.
“There are many thousands of borrowers aged 50 to 90 plus whose interest-only mortgages have expired – or are about to.
“They’re finding themselves trapped, paying their lenders’ higher standard variable rates, when in fact they often do not need to.
“There is a much wider choice of affordable solutions for mid to later life borrowers on the market today.
“And tools such as the LiveMore Mortgage Matcher® can help brokers navigate the often complex later life market so they can find affordable solutions for clients’ specific circumstances in these changing times.”
Richard Pike, chief sales and marketing officer at Phoebus:
“No surprises on today’s Base Rate decision.
“November’s inflation figure was higher again, as anticipated, and the Bank of England’s characteristically cautious approach was never going to allow a rate drop before the New Year.
“Consumers will take heed of the general “rates coming down” rhetoric as we move into the New Year, and I think this will positively affect gross mortgage lending figures in 2025.
“Lenders will be working on more efficient front-end and servicing processes so they can better manage their customers and maximise profits and margins in this constantly evolving economic picture.”
David Hollingworth, associate director at L&C Mortgages:
“Today’s decision to hold is no surprise but borrowers hoping to see more positive movement next year will be buoyed by the three votes for a cut this month.
“Markets are anticipating that stubborn inflation may hold back the pace of those cuts, which has knocked on into fixed rate pricing.
“I expect mortgage lenders to be quick out of the blocks in January and to continue to price as sharply as possible, but the Bank has been consistent in its tone, suggesting the likely pace of rate cutting will be gradual.
“On a positive note, the market is ending the year with better rates than when it began and that looks likely to be true next year.
“However, borrowers will look at today’s rates with varied perspectives.
“Those that are approaching the end of a 5-year fixed rate below 2% will be bracing themselves for the pain of higher monthly payments.
“On the other hand, those that fixed 2-years ago in the wake of the mini-Budget will be chomping at the bit to take advantage of the lower rates now available.
“In both scenarios it will pay to be organised.
“Beginning to shop around three to four months before the end of the current deal will allow time to arrange a smooth switch and avoid slipping onto the standard variable rate which will typically be substantially higher than the best rates.”
Ryan McGrath, director of second charge mortgages at Pepper Money:
“With prices rising at their fastest pace since March, today’s announcement that rates will hold is not the Christmas present that some current and prospective homeowners may have been wishing for.
“Households with variable rate mortgages, or those who are looking to remortgage, will be particularly affected by market conditions not providing the stability that the Bank of England needed to move on rates.
“This reality means that homeowners on low fixed-rate mortgages will be eager to keep them.
“That’s where a second charge mortgage can be invaluable.
“For many, they provide an important chance to keep your existing deal, including the interest rate and term, and avoid early repayment charges but not have to put other parts of your life on hold.
“People who are looking to renovate their home, buy another property, or reduce monthly outgoings by consolidating debt should consider a second charge mortgage.
“These can also be useful if you need to pay an unexpected tax bill, like the farmers, small business owners and independent school fee-payers whose taxes will rise following the Autumn Budget.”
Mark Michaelides, chief commercial officer at Molo Finance:
“Today’s decision to hold rates flat at 4.75% comes as no surprise, especially after November’s inflation numbers earlier this week.
“However, what is most interesting is that the MPC itself is split on this decision, with three members voting for a cut.
“This is reflective of the UK’s struggle to stimulate growth and we are likely to see pressure increase further for a cut in February if economic indicators do not start to improve soon.”
Peter Stimson, head of product at MPowered Mortgages:
“The decision was never in doubt, but the manner in which it was reached has raised some eyebrows – and hopes – for 2025.
“The fact that a third of the Monetary Policy Committee voted for an immediate rate cut suggests that several of the Bank’s decision-makers are more concerned by underlying economic issues than the jump in consumer inflation revealed yesterday.
“The surprise surge in wage inflation, rather than the jump in CPI to 2.6% – which had been widely expected – had caused some consternation on the swaps market, which determines mortgage interest rates more directly than the Bank’s base rate decisions.
“But the minutes published alongside today’s decision should provide some rays of hope that the next Base Rate cut may be nearer than the markets are currently forecasting.
“Rather than just making the three base rate cuts currently priced into the swap curves, if economic conditions prevail the Bank may be prepared to cut faster and deeper in 2025
“Despite the current backdrop of rising swap rates, we can expect to see some frenzied competition between mortgage lenders in January.
“The first weeks of the year are traditionally an important time for lenders, with many slicing into their margins to offer lower interest rates in a bid to win new customers.
“While the Base Rate has only been cut twice in 2024, the prospect of three or more reductions in 2025 will embolden lenders to price very competitively at the start of the year as they battle for market share.”
Richard Flax, chief investment officer at Moneyfarm:
“The BoE has decided to skip the final rate cut of the year. The result was largely expected, although it might be taken as a slightly “dovish hold”, since three MPC members voted in favour of reducing rates.
“This decision was driven by rising inflation and significant uncertainties globally, particularly with the new Trump administration in the United States and the recent UK budget.
“The BoE aims to address these inflationary pressures while navigating the complex global economic landscape. It’s a delicate balance to strike.
“The BoE acknowledged that progress on both economic activity and progress on disinflation had slowed.
“Looking ahead, the BoE has indicated that approximately two rate reductions are expected next year, reflecting a cautious approach to future monetary policy adjustments.
“This decision underscores the BoE’s commitment to carefully balancing inflation control with economic stability in an uncertain environment.”
Susannah Streeter, Head of Money and Markets, Hargreaves Lansdown:
“There’s a chill spreading just before Christmas, with interest rate cuts on ice, and cold water being thrown on hopes for a rapid reduction in rates next year.
“The decision to keep rates on hold had been widely predicted, given that inflation has veered further away from target, but it did little to calm the jittery sentiment on the markets.
“The FTSE 100 stayed deep in the red, while the pound started to slide again against the dollar, trading at $1.26.
“The door is still open to cuts however, as this was not a unanimous decision, with three members of the committee voting for another 0.25% rate cut.
“However, they are expected to be fewer and far between next year, with the markets pricing in just two interest rate cuts.
“The Bank of England is ringing in the same discordant notes of caution as the Federal Reserve.
“The Fed’s guidance yesterday of just two further interest rate cuts next year sparked nervousness and a wave of sell-offs, and the Bank’s decision has done little to provide much cheer.
“We are seeing tighter scrooge like policy returning from central banks, who remain cautious about inflationary risks ahead – fresh tariffs from Trump are looming and in the UK the effects of the Budget changes on prices still hard to calculate.
“Nevertheless, with the UK economy contracting, and inflation still more likely than not to head back down towards target next year, we’re still on the rate-cutting track but the inclement economic weather means we are on go-slow.
“This could be good news for savers and those looking for an annuity, but bad news for mortgage borrowers.”
Nicholas Hyett, Investment Manager at Wealth Club:
“In the bleak midwinter,
Interest rates were froze,
GDP went backwards,
Inflation rates they rose,
Consumers they were struggling,
Struggling, struggling so,
In the bleak midwinter, not so long ago.
Rock and a hard place,
Bailey in-between,
Recession and stagflation,
Risk on every screen,
Fed already stalling,
With a hawkish turn,
Cut to boost the market, or hike and watch it burn.”
