Mortgage market holds breath as interest rate pause prolongs uncertainty

The Bank of England has held interest rates at 3.75 per cent, as policymakers continue to balance persistent inflation pressures against growing economic uncertainty.

The decision follows a Monetary Policy Committee meeting in which members voted to keep rates unchanged, reflecting concern that recent price rises could prove more durable than previously expected.

Inflation, measured by the Consumer Prices Index, rose to 3.3 per cent in March and remains well above the Bank’s 2 per cent target, underscoring the challenge facing rate-setters as they attempt to bring price growth back under control without further weakening the wider economy.

While holding rates steady, the Bank is understood to remain wary of underlying inflationary pressures, particularly in services and wages, which have shown resilience despite a slowdown in broader growth momentum.

The decision also comes against a backdrop of heightened global uncertainty, with geopolitical tensions and energy market volatility adding further complexity to the outlook for both inflation and economic activity.

For households and businesses, the decision means borrowing costs are likely to remain elevated for longer, even as expectations for the timing and direction of future rate moves continue to shift in response to incoming data.

Financial markets had been divided ahead of the announcement, with some investors still pricing in the possibility of policy easing later in the year, while others warned that persistent inflation could keep rates higher for longer than previously anticipated.

The Bank’s latest stance suggests a cautious approach going forward, with policymakers likely to remain highly sensitive to any signs that inflationary pressures are becoming entrenched in the economy.

Attention will now turn to upcoming economic data releases, which will help shape expectations for the next meeting and determine whether the current pause marks a turning point — or simply a holding pattern in a more prolonged period of restrictive monetary policy.

CEO of Foxtons, Guy Gittins said: “Following the increase in inflation to 3.3% this month, a hold on the base rate provides a welcome degree of stability for the property market. It also gives buyers greater certainty around borrowing costs when making long-term financial decisions.

The market isn’t moving at the same pace as 2025, due to the Q1 boost we experienced last year from the stamp duty holiday ending. When compared to 2024, we’re seeing a stable and improving landscape, with resilient buyer interest and viewing numbers at Foxtons up in April when compared to March 2026.”

Verona Frankish, CEO of Yopa said: “The property market hasn’t stalled, it’s simply found a more sustainable rhythm and today’s decision to hold the base rate will only help sustain this measured level of momentum moving forward.

As the year progresses, we expect this steady level of activity to continue, with the prospect of rate reductions later in the year likely to provide a further boost to market confidence.”

Jonathan Samuels, CEO of Octane Capital added: “Today’s decision to hold the base rate was widely expected and reflects the Bank of England’s ongoing challenge in bringing inflation fully under control.

Persistent pressures continue to limit the Bank’s room for manoeuvre and the question now is whether it can afford to be more bullish in signalling a path toward cuts.

Caution remains the priority, but without clearer forward guidance, there’s a risk of prolonging subdued activity across interest rate-sensitive sectors such as the property market, where confidence hinges on both stability and visibility.”

Chris Hodgkinson, Managing Director of House Buyer Bureau said: “Another hold on interest rates is unlikely to do much to lift property market sentiment.

The market is already treading with great caution against a backdrop of economic and geopolitical volatility and, while today’s decision provides a degree of certainty, it also prolongs the current sense of inertia.

Buyers and sellers have been waiting for a clearer signal that borrowing costs are on the way down and, without it, many will continue to sit tight. As a result, this ongoing hold risks sowing further uncertainty into a market that’s already lacking confidence and it certainly won’t be enough to jump-start activity.”