After the Bank of England dropped its base rate back in February from 4.75% to 4.5%, anticipation was high for the Bank’s March meeting. Would it drop rates again or err on the side of caution?
On March 20, 2025, the Bank of England announced that it was holding its base rate at 4.5%. It is likely that the Bank wants to make sure it is striking the right balance between keeping inflation as close to the 2% target as possible and having a healthy economy. In this article, we’ll look at the reasons why the Bank of England decided to hold the base rate and what the future might hold.
What Is The Base Rate and Why Was It Held?
The Bank of England’s base rate is what it pays commercial banks that hold money with them to offer their services to customers. The money they use to facilitate mortgages and other loans. This can then influence the rates those banks charge people who borrow money.
There are eight base rate meetings each year. These meetings discuss whether the base rate should be held, dropped, or raised to keep the inflation rate as close to the 2% target as possible.
At the March meeting, the committee voted by a majority of 8-1 to keep the base rate at 4.5%, with just one member voting for a cut. The team here at Doctors Mortgages Online thinks there are a few reasons behind the decision to hold the base rate this time around:
- The Bank of England Wants Longer To See How The First Cut Pans Out
The current 4.5% base rate is the lowest since June 2023. It’s only natural that the Bank of England proceeds with caution. The economy is always changing, and there may not have been enough time to see how the February cut will pan out, hence another hold. The Bank will want to see sustainable stability before choosing to lower the base rate again.
- There Are Further Base Rate Cuts Expected Later In The Year
It has been heavily speculated that further base rate cuts can be expected later in the year. With this in mind, the Bank of England is probably wary of bringing the base rate down too fast, too soon, wanting to see stability first.
- Inflation Figures Are Better Than Expected
The Bank of England’s base rate is discussed with the hope of keeping inflation under control. The latest inflation figures were better than expected at 2.8%, lower than the previous month’s 3%, but still higher than the 2% target. Again, the Bank of England probably wants to take a cautious approach to lowering the base rate any more at this time to keep inflation as close to the target as possible.
- The Spring Budget
A few days after the base rate meeting on March 26, Chancellor Rachel Reeves set out the government’s plans for the economy in the Spring Statement. Uncertainty surrounding intended government spending may have been another contributing factor to a base rate hold.
- Trump’s Tariffs
President Donald Trump is proposing to implement trade tariffs, reducing exports from the UK to the US. It is unclear how this will impact the UK market at this stage, so it is probably another reason behind the Bank of England’s ‘wait and see’ approach to lowering the base rate.
- Stamp Duty Changes
Stamp Duty Land Tax (SDLT) will change from April 1, 2025, affecting homebuyers in England and Northern Ireland. Changes mean that first-time buyers will now have to pay stamp duty on properties over £300,000 (previously exempt up to £425,000). For other buyers, the nil rate threshold will drop to £125,000 (previously £250,000). At the moment, it is unclear what these changes will mean for the economy and house purchases, so the Bank will be waiting for stability before going ahead with more drops.
To learn more about the SDLT changes and what they mean, read our blog.
Our Expert Predictions
The economy is always moving, so predictions should never be solely relied upon. However, our mortgage and financial experts here at Doctors Mortgages Online strongly suspect that the base rate is on a downwards trajectory. It will be a slow process, but we believe that the base rate will be down to 4% at the end of the year – expecting a drop in the summer and around Christmas. A year ago, the base rate was at 5.5%, so we are positive that things are moving in the right direction and could have a positive impact on those looking to borrow.
