The Bank of England is expected to keep its base rate at 4.5% in its upcoming decision on March 20, leaving millions of mortgage holders bracing for potential financial impact. While some had anticipated rate cuts in 2025, shifting economic conditions suggest a more cautious approach, with experts warning that borrowing costs may remain higher than pre-pandemic levels.
Interest Rates Hold Steady Amid Economic Uncertainty
The Bank of England’s Monetary Policy Committee (MPC) is widely expected to maintain the base interest rate at 4.5% at its upcoming meeting. This decision follows persistent economic challenges, including inflationary pressures and stagnant growth forecasts.
Interest rates directly influence borrowing costs, including mortgages. For homeowners with variable-rate or tracker mortgages, an unchanged base rate means their monthly repayments will remain steady. However, the prospect of sustained high rates into 2025 raises concerns for those seeking new mortgage deals or refinancing options.
James Enos, a financial expert at Hodge Bank, noted that while there has been a decline in swap rates—an indicator of market expectations for future interest rates—the overall environment remains unpredictable. “We have seen a steady reduction in swaps; however, the market remains unpredictable due to events both at home and overseas,” he said.
The Bank of England’s decision is also influenced by external factors. The European Central Bank (ECB), which currently maintains an interest rate of 2.5%, is expected to introduce further cuts. Some analysts argue that this disparity could put pressure on UK policymakers to reconsider their stance, particularly as the British economy faces slower growth.
Mortgage Holders Advised to Prepare for Prolonged High Rates
For millions of UK homeowners, the prospect of sustained high borrowing costs has significant financial implications. While many had anticipated multiple rate cuts in 2025, expectations have shifted, with analysts now forecasting just two possible reductions over the course of the year.
Michael Field, chief market strategist at Morningstar, highlighted key reasons behind the central bank’s cautious stance.
He pointed to the Bank of England’s recent downgrade of growth expectations to 0.75% for 2025, reducing concerns about overheating but increasing the need for economic stimulus. “If anything, lower rates are required to stimulate the economy,” Field observed.
Additionally, inflation trends remain a critical factor. The recent increase in inflation during January complicates the outlook for rate cuts, as policymakers seek to balance economic support with price stability. According to Tom Bill from Knight Frank, the housing market is still expected to see “single-digit house price growth,” but ongoing uncertainty calls for caution.
Homeowners and potential buyers are being urged to stay informed about market trends and consider their options carefully. Experts recommend reviewing mortgage terms, assessing fixed-rate options, and seeking professional financial advice to navigate the evolving interest rate landscape.
