The Bank of England has maintained the current interest rate at 5.25% for the sixth time in a row.

The decision comes as inflation, which measures price rises over time, remains above the Bank’s 2% target at 3.2%.

As well as the interest rate decision, the Bank has just released its latest forecast estimating what will happen to inflation and the UK economy.

The Bank of England governor Andrew Bailey believes that it is not yet the time to cut interest rates.

He says that he it needs to “see more evidence” that price rises have slowed further before cutting interest rates.

Bailey said he was “optimistic that things are moving in the right direction”, with the Bank expecting inflation to fall “close” to its 2% target in the next couple of months.

“We need to see more evidence that inflation will stay low before we can cut interest rates,” he said.

Bank of England policymakers were not unanimous in holding rates at 5.25%.

The nine-member panel that decides rates saw seven vote for a hold, and two for a cut – so that is one more vote for an immediate cut compared with the last decision.

Markets are only fully pricing in a cut in September, but many economists think the Bank will make a move sooner than that to cut rates.

Some analysts believe the Bank has even left open the possibility of a cut on 21 June, after two sets of figures for inflation and wages. However, August or September seems to be the most likely timing.

Industry reaction:

Nick Leeming, chairman of Jackson-Stops, said: “The Bank of England has taken a ‘no news is good news’ approach to today’s decision, opting to hold firm for another six weeks. While no change was widely assumed, the expectation is that June’s meeting will finally break the base rate deadlock and initiate a rate cut.

“The Bank of England’s hawkish approach may not be headline grabbing, but at least it isn’t a distraction for buyers or sellers who want to press on with their sales and searches. While everyone in need of a mortgage would prefer rates to fall significantly, interest rates of around 5% are not high by historic standards.

“It’s important to keep in mind that, while the past 18 months have been a time of economic headwinds, the exceedingly low rates that became the norm in the 2010s were the exception and not the rule.

“A pivot towards lower rates in June, even if only minor, would help to ease affordability constraints at the lower end of the housing market and help to ensure chains don’t break down once sales have been agreed.

“For now, today’s ‘hold’ should help to maintain the fragile momentum we’ve seen building in the housing market recently. Across the Jackson-Stops network in April we have seen a year-on-year uptick in viewings, new instructions and new buyer enquiries, which bodes well for a busier second half of the year.”

Mark Manning, managing director at Northern Estate Agencies Group, commented: “Looking at where inflation is, I believe a rate cut should have happened today, but there are clearly other factors at play and the BoE is obviously waiting for stronger signs that the cost-of-living crisis has fully abated.

“The market has been a lot busier than expected since the start of 2024 and demand has come back, resulting in lenders being inundated with applications. This has caused some of them to put mortgage rates up to try to slow the flow, but if the BoE had reduced rates, lenders would have had to follow suit and introduce lower rates.

“I hope that we see a decrease later in June, which will help to increase confidence in the market and stop people sitting on the fence while they wait for the expected reduction.”

Jeremy Leaf, north London estate agent, remarked: “The Bank had some tough choices to make – on the one hand it can see inflationary pressures easing with the headline figure now at its lowest for two years but on the other, wage growth remains stubbornly high.

“As far as the housing market is concerned, we are finding borrowers increasingly concerned at the uptick in mortgage rates and the delay in what most people expect is a cut in base rate sooner or later.

“The comments and voting pattern around the decision are sometimes more interesting than the decision itself and clearly the direction of travel for rates is downwards when it is judged the right time to do so. The chances of even a small reduction resulting in runaway property prices or substantial rise in activity are slim, bearing in mind recent fairly flat activity.”

Tom Bill, head of UK residential research at Knight Frank, commented: UK housing market activity has improved this spring but there is still a sense of hesitancy among buyers and sellers as they wait for the first rate cut in four years. Once that moves onto the short-term horizon, mortgage rates should edge lower and demand will improve. In the meantime, there is downwards pressure on house prices as mortgage costs creep higher, supply rises and a wave of homeowners roll off sub-2% mortgages. We expect UK prices to rise by 3% this year as services inflation gradually comes under control and borrowing becomes slightly cheaper in the second half of the year.”

Nathan Emerson, CEO of Propertymark, said: “As interest rates continue to remain the same in order to combat levels of inflation this country has not witnessed for decades, Propertymark is optimistic that buyers will continue to adapt to these new market conditions. Our own Housing Insight Report discovered that there has been a 4% increase in the number of potential buyers registered, and an 8% increase in the number of available properties to rent, which shows that there are some reasons to remain optimistic that the housing market is recovering from shock economic factors from the last three years.” 

Robin Rathore, CEO, Bamboo Auctions, said: “While holding the base rate provides stability to the wider economic environment, the sector remains fragile; fall through rates are high and news of mortgage rate increases are not giving any comfort to buyers or sellers.

“We’re seeing more activity in the market than we were 12 months ago, and this is partly down to rising payments as mortgage terms come to an end pushing many to sell. Sensible pricing remains the key determinant for vendors who are looking to sell quickly. We’ve also seen a 30% increase in the number of sellers listing for sale by online auction through our agent partners, as sellers desperately seek more speed and certainty in their transaction.”

Adam Feather, director of Robert Anthony Estate Agents, commented: “The Bank’s decision to hold rates comes as no surprise but there are growing calls for a cut sooner rather than later. Afterall, inflation has been heading in the right direction and the property market is showing strong signs of recovery, and so a rate cut today would have delivered a much-welcome boost.”

Ryan Davies, strategy director at Bluestone Mortgages, noted: “Today’s decision will no doubt be a blow for would-be and existing borrowers who were hoping to see interest rates come down and mortgage payments to ease. Rates remain at their highest level for 15 years, putting sustained pressure on household finances and leaving many feeling squeezed.

“For those concerned about how ongoing affordability challenges will impact their homeownership ambitions, remember that there is always help at hand. Whether that be getting in touch with their mortgage lender, or speaking with a broker to understand the different options available, it’s our duty as an industry to help these customers step onto or up the property ladder.”

Jonathan Bone, Mortgage Lead at Better.co.uk, said: “The base rate hasn’t budged since last August, causing headaches for homeowners looking to remortgage and locking out first-time buyers struggling with sky-high prices. Inflation has dragged its feet coming down, which has pushed up fixed mortgage rates once more.

“But there’s a glimmer of hope on the horizon: the market is buzzing with predictions of a potential interest rate cut sometime between June and August. Yet, without a crystal ball, it’s impossible to say for certain whether this will materialise.

“If you’re due to remortgage very soon, it’s worth knowing that some lenders will charge you for sending someone out to value your property. If you then find a different lender offering better rates after a potential Bank of England rate cut, you won’t get a refund for that original valuation, leaving you out of pocket. So, if you’re playing the waiting game to see what interest rates are doing over the next few months, be aware that not all lenders will charge you a valuation fee so speak to a mortgage broker who can point you in the direction of the lenders who offer a free valuation.”

Bank of England urged to cut interest rates as mortgage costs rise