Monetary Policy Update: BoE Keeps Rate at 4.5% – What It Means for the Economy?

In a widely anticipated decision, the Bank of England (BoE) has chosen to hold the base interest rate at 4.5%, emphasizing that borrowing costs must “remain restrictive for sufficiently long” to curb inflation and bring it back to the 2% target. This move reflects the Bank’s cautious approach in the face of economic uncertainty, with factors such as global trade tensions, slowing UK growth, and persistent inflation concerns shaping the decision.

With eight out of nine members of the Monetary Policy Committee (MPC) voting to keep rates steady—leaving only Swati Dhingra in favor of a cut to 4.25%—it is becoming increasingly clear that any reduction in borrowing costs will be gradual. This signals that homeowners and prospective buyers may need to brace for higher-for-longer interest rates, making affordability a key concern in the property market.

A Balancing Act: Inflation vs. Economic Growth

Andrew Bailey, the Governor of the Bank of England, acknowledged the fragile state of the UK economy, noting that GDP shrank by 0.1% in January. Weak economic growth typically puts downward pressure on inflation, making the case for interest rate cuts. However, the Bank is also wary of persistent wage growth and global supply chain disruptions, which could keep inflation elevated and necessitate a prolonged period of tight monetary policy.

The situation has been further complicated by the global economic landscape. The US Federal Reserve also opted to hold rates at 4.5%, while President Donald Trump’s new tariffs and China’s retaliatory measures have sparked fresh concerns over trade and market volatility. These factors could have ripple effects on the UK, particularly for businesses and mortgage borrowers, who may see lending criteria tighten in response to heightened risk.

What Does This Mean for Mortgage Borrowers?

For those on fixed-rate mortgage deals, this decision offers stability—at least for now. However, borrowers with variable or tracker mortgages will still need to manage higher repayments. Additionally, first-time buyers and homeowners looking to remortgage may face stricter lending conditions, as lenders remain cautious amid economic uncertainty.

While a rate cut could be on the horizon later this year, the BoE’s message is clear: there is no rush. Any decision to ease borrowing costs will depend on how inflation, wages, and global market conditions evolve over the coming months.

Expert Mortgage Advice Tailored for You

With interest rates holding steady and economic uncertainty looming, now is the time to seek expert guidance to secure the best mortgage deal. At Mortgage-Tek, we specialize in helping professionals—including contractors and self-employed individuals—navigate the mortgage market with confidence.

Whether you’re looking to buy your first home, remortgage, or invest in property, our experienced advisors provide tailored solutions to match your financial situation. Get in touch today and let us help you find the right mortgage deal in an ever-changing economic climate.