The Bank of England has maintained the base interest rate at 3.75% following its latest Monetary Policy Committee meeting, marking a pause in the rate-cutting cycle that began in August 2024.
The unanimous decision reflects policymakers’ concerns about geopolitical tensions, including conflict in the Middle East, which have contributed to market volatility and rising oil prices. Prior to recent events, some analysts had anticipated a further rate cut, particularly after inflation fell to 3% in January and the Bank rate reached its lowest level since February 2023.
Market impact
The decision has implications for mortgage borrowers and property transactions. According to Rightmove’s Matt Smith, recent geopolitical uncertainty has increased volatility in swap rates, which underpin fixed-rate mortgage pricing. Some lenders have adjusted rates upwards this week, despite the base rate remaining unchanged.
Smith noted that the average monthly mortgage payment on a new purchase has increased by approximately £45 recently, though it remains around £70 lower than the same period last year.
Amy Reynolds from Antony Roberts reported that property market participants are discussing Middle Eastern developments, but pricing and transaction levels have not been materially affected. “Demand remains resilient, particularly for well-priced, high-quality homes,” Reynolds said.
Industry perspective
North London estate agent Jeremy Leaf observed that market activity seen in early 2025 persists, though caution has increased. “Buyers who are not sellers are becoming increasingly conscious of the need to build in a contingency within calculations for higher mortgage rates,” Leaf stated.
The Bank of England has implemented six interest rate reductions since August 2024. OnTheMarket president Jason Tebb noted that these cuts have improved buyer affordability, and expressed disappointment at the pause in rate reductions this month.
Nathan Emerson, CEO of Propertymark, said the decision provides stability for households managing cost-of-living pressures whilst navigating a market facing supply constraints and rising house prices.
Outlook
Economists have revised expectations regarding future rate cuts, with some analysts raising the possibility of increases if economic pressures persist. The timing of any future rate adjustments remains uncertain as policymakers assess the duration and severity of current geopolitical tensions.
Industry figures report that transactions are continuing, particularly among buyers who delayed decisions during uncertainty surrounding the Autumn Budget.
