Frances Haque, chief economist at Santander UK, said the maintenance of the base rate was expected, but despite this, many lenders have been cutting rates in the last week.
“Our forecasts suggest that we’re still likely to see two more base rate cuts over the coming year – most likely ending 2025 at 3.75% – with this being ‘priced in’ to current mortgage rates.
“Aspiring homeowners and those already on the ladder could expect to see mortgage rates continue to hover between the top end of the threes or lower end of the fours. For this to change significantly, we’d need to see changes in economic data – and as ever, that could see mortgage rates go up as well as down,” she noted.
Haque said there had been “strong growth” in Q1 but this was balanced by GDP data showing a 0.3% decline month-on-month in April.
“As has been the trend for the last few years, risks to the outlook remain – there is the potential for rising oil prices on the back of the crisis in the Middle East and increased market volatility. Further loosening in the labour market, with unemployment increasing to 4.6% and wage growth falling a little more than expected, has also been seen, but wage growth is still significantly above rates compatible with a 2% inflation target.
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“While these may pose bumps in the road for buyers, the traditional increase in home moving we see during the summer will likely continue to drive demand for properties as we enter Q3 which, coupled with affordability improvements, means we expect the 2025 mortgage market will continue to grow,” she noted.
‘Plenty of positives’ in wider market
Ben Thompson, deputy CEO of Mortgage Advice Bureau (MAB), said the Bank of England was “always going to play it safe this time around”, agreeing that the decision to hold the base rate was “widely expected”.
He continued: “There are still plenty of positives to be taken from this, especially for those who think their financial situation may set them back from getting a mortgage. From 100% loan-to-value (LTV) lending options now available to mortgages that stretch your borrowing power, there are so many ways to get on the ladder – regardless of the size of your income or deposit.
“It’s also good to look at how far we’ve come, with the current base rate being the lowest we’ve experienced since May 2023. We can still anticipate cuts later in the year, although how soon these will arrive remains to be seen. As always, speaking to a broker should be your first port of call. Their expertise is invaluable in helping you get mortgage ready and navigate current market conditions with ease.”
Rob Clifford, Stonebridge’s chief executive said the decision “sends a clear message” that the Bank of England “remains firmly focused on reining in inflation despite signs of a weakening UK economy”.
“But we see this pause as temporary. Though inflation risks are rising, the Bank of England appears confident the recent uptick is temporary and will ease in the months ahead.
“For that reason, we continue to expect two rate cuts this year – likely in August and November – potentially pushing the base rate below 4% for the first time since early 2023,” he said.
Clifford added that borrowers would have to “wait a little longer to see if this translates into lower mortgage rates, although we think that outcome is very likely”.
“With the outlook shifting daily, brokers need to be proactive in contacting their customers. The market is confusing, and many borrowers will be seeking clarity and reassurance. Expert advice will be vital in helping them make informed decisions in confidence,” he said.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said the Bank of England’s “cautious approach” meant it had “missed a real opportunity to be bold by cutting rates again”.
“This would have sent out a strong message, helping boost the housing market and wider economy, particularly now that the stamp duty concession is no longer available.
“There is some good news for borrowers, though, in that lenders have reduced mortgage rates and eased criteria in recent weeks. This rate hold was largely expected by the markets, but if swap rates fall, this will enable lenders to price their fixed rate mortgages more keenly, easing borrowers’ affordability concerns.
“Those looking to take out a new mortgage or refinance in coming months should plan ahead as much as possible, seeking advice from a whole-of-market broker. We expect the MPC to continue on the anticipated path for base rate with further reductions in coming months, but what can’t be guaranteed is where rates end up, nor the pace it takes to get there,” he added.
