After voting to drop the base rate in May to 4.25%, people were eager to discover what the Bank of England would decide to do in its June meeting. Would it continue its careful and measured approach, or would the base rate go down again?
Well, it would seem that the Bank of England is taking a slow and steady approach to dropping its base rate as it voted to hold it at 4.25% on June 19, 2025. With sustaining a healthy economy and keeping inflation as close to the 2% target as possible, it is likely that the Bank doesn’t want to risk lowering its base rate too soon.
Below, we’ll look at what another base rate hold means, why this has happened, what it means for people wanting to get on the property ladder, and our predictions for when it might be cut again.
The Base Rate Explained
Simply put, the Bank of England’s base rate is what it charges lenders to borrow money so they can then offer their services to customers. This can then have an impact on the interest rates banks and lenders charge borrowers on loans and mortgages, particularly variable, tracker mortgages.
There are eight base rate meetings each year. In them, the Bank of England’s Monetary Policy Committee (MPC) votes on whether they should hold the base rate to keep inflation under control, drop it, or raise it.
Why Was The Base Rate Held In The June Meeting?
On June 19, the MPC voted to hold the base rate at 4.25% – three members voted to cut the rate to 4% and six members voted to keep the base rate at 4.25%. The majority wins, and a hold should be viewed in a positive light. There are a few reasons why our Doctors Mortgages Online team thinks the Bank decided to hold the rate this time:
- The Inflation Decrease Is Not Enough For A Base Rate Drop
The most recent inflation figures slowed to 3.4% in the 12 months leading up to May, compared to 3.5% in April*. While inflation is edging in the right direction towards the government’s 2% target, it’s still high, and it’s expected that the Bank of England doesn’t want to risk making a rash decision and jeopardising any progress that has been made towards lowering inflation.
- The Bank Is Taking A Measured Approach To Lowering The Base Rate
There is no denying that the Bank of England is taking a cautious approach towards the base rate. The economy is always changing, and it’s likely that the Bank wants to ‘wait and see’ before choosing to lower the base rate again. They’ll want to see that the country’s economy is holding stable before making any further changes.
- Uncertainty In the Middle East
The development of conflict in the Middle East is likely to be another consideration the Bank faces. Oil prices are expected to rise, which could have a knock-on effect on inflation if the conflict continues as it is currently or escalates further.
What Does The Base Rate Mean If I’m Looking To Buy A House?
If you’re looking to buy a house in the near future, you’ll likely want to know what the base rate means for you. While the base rate does have some influence over mortgage rates, it’s only a small slice of the pie. Other things like inflation rates, the global economy, property demand, and importantly, the swap rate – how much lenders pay themselves to borrow money to have a constant supply of funds to offer services over a set period – have a bigger influence on the cost of your mortgage.
There’s a lot of hype about the base rate and what it means for mortgages every time the Bank of England meets. You might be left wondering if you should hold off before applying for a mortgage or whether to get on with things as they are.
How much you earn, your committed monthly spending, and the size of your deposit can all influence the mortgage rate you are offered, so waiting for the base rate to drop before applying may not be the best option. If you’ve fallen in love with your dream property, don’t miss out to someone else by waiting for base rates to drop. The house buying process can take months from your offer being accepted, and up until completion, you can always get moved to a lower rate if one becomes available.
Our Predictions On What Will Happen Next With The Base Rate
Four base rate meetings are left this year, and they happen every six weeks. The next meeting is on August 7, 2025. Predicting what might happen next is difficult, as there are a whole lot of external factors that could sway the Bank’s decision. The fact that three members of the MPC voted to drop the rate this time is immensely positive and is hopefully a sign of things to come.
Although the Bank of England is taking a slow and steady approach to any changes it makes to the base rate, we strongly anticipate that the rate will be down to around 4% or lower by the end of the year, with another drop over the summer and/or at Christmas. Watch this space.
*https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/may2025
