The Bank of England base rate has been held at 4.5% following the latest Monetary Policy Committee (MPC) review. This was highly anticipated following worsening inflation, impending tax hikes and uncertainty surrounding US President Donald Trump’s trade tariffs.
When is the Bank of England base rate expected to come down?
According to interest rates swap data, it was indicated that there were 95% odds of the rate being held at the same level this month. However, economists have predicted that there will be two rate cuts later this year. The first is expected in May, with a 77% likelihood. The second cut has a 55.6% probability of happening in August. This is positive news compared with January when only one cut was expected in February.
Andrew Bailey, the Bank of England’s governor, has previously emphasised the importance of taking a gradual approach to future interest rate cuts. This is especially the case after the inflation rate jumped unexpectedly from 2.5% to 3% in the year to January.
How does this affect mortgage rates?
The base rate determines borrowing costs so when it’s increased, mortgage interest rates usually increase as well as other borrowing costs. When it’s cut, mortgage interest rates tend to come down as a result. As it hasn’t changed, there’s unlikely to be a change to mortgage rates.
The inflation increase to 3%, moving it further away from the Bank of England’s target rate of 2%, was one of the reasons behind the decision to maintain the rate at 4.5%. This means that caution still needs to be taken to keep it under control. However, growth expectations were recently halved to 0.75% by the Bank of England.
As such, it may take lowered rates to stimulate the economy. If the base rate is cut in May as predicted, lower mortgage rates should be seen as a result. This will be welcome news if you’re looking to get on the property ladder or remortgage.
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