THE Bank of England has held the base rate at 3.75% in a decision widely expected with experts saying it’s a “cautious but necessary” move that will benefit savers most.
The Monetary Policy Committee (MPC) voted 5 to 4 in favour of a hold today. Four members voted to reduce the rate by 0.25%, to 3.5%.
This comes as inflation remains “sticky” above the Bank’s target of 2% – it was at 3.4% in December.
Experts said the Bank is using a “wait and see” approach to work out if the base rate is able to come down further this year.
They say that a hold means more of the same with everyone struggling with tight budgets.
Savers benefit most, experts claim – but the interest on savings accounts have been reducing this year anyway.
Savers benefit most
Philly Ponniah, Chartered Wealth Manager and Financial Coach at Philly Financial, said the hold doesn’t change much for anyone.
She added: “Holding rates at 3.75% feels like the Bank choosing caution, and that is probably the right call. Inflation is easing but not beaten, and cutting too early would risk undoing hard won progress. This decision shows the Bank would rather wait for clearer proof than gamble with price stability.
“For the average person, a hold means more of the same. Budgets remain tight, but there is no new shock to absorb. Mortgage holders avoid higher repayments, and while relief is not here yet, certainty matters when household finances already feel stretched.
“For borrowers, especially those on variable rates or refinancing soon, high costs are sticking around for longer. For savers, this is the upside of a hold although we are already seeing banks cutting savings rates meaning they aren’t as wed to the base rate as before.”
It’s time for a change
Tony Redondo, Founder at Newquay-based Cosmos Currency Exchange, said inflation needed to be brought under control before the Bank reduces its base rate further.
He continued: “The Bank of England’s decision to hold rates at 3.75% is cautious but necessary given inflation’s rise to 3.4%. This ‘wait and see’ approach prioritises price stability over short-term growth. For consumers, it means continued cost-of-living pressures.
“Borrowers on tracker or variable rates face unchanged payments, while those seeking fixed mortgages should act quickly as lenders raise rates. Savers benefit most – high-interest accounts above 5% remain available, offering a crucial window to lock in returns before cuts resume. Though the rate hold may disappoint those struggling with high bills, controlling inflation that erodes purchasing power remains the priority.
“The plateau extends financial pressures but protects against the greater harm of unchecked price increases that diminish everyone’s income. This measured stance balances immediate relief against longer-term economic stability, acknowledging that sustainable recovery requires inflation control first.”
Adam Stiles, Managing Director at London-based Helix Financial Partners, said the Bank of England is being cautious.
He added: “In a world of political and economic instability, the Bank of England has opted for cautious stability. The news isn’t a surprise. All things remain equal until the next meeting in March.
“Savers should see stability with rates, as will borrowers assuming Swap rates hold steady. Borrowers would of course welcome a drop in rates but a wait-and-see approach to other economic factors is the right decision.”
Flawed from the start
Samuel Mather-Holgate, Managing Director & IFA at Swindon-based Mather and Murray Financial, called for a new direction in the UK.
He continued: “With Governor Andrew Bailey in charge, the Bank is always going to be cautious, so it’s not a surprise rates are on hold today. However, they should have been cut and should be cut again next month.
“The economy is in the bin and employers are scared of hiring. Stubborn inflation shouldn’t be a barrier to stimulating the economy as the cost of goods isn’t being driven by consumer demand. It’s time for a change in personnel to everyone running the economy. New governor, new chancellor, new chance.”
Rohit Parmar-Mistry, Founder at Burton-on-Trent-based Pattrn Data, said the system is broken.
He added: “The data confirms what many of us already know: the economic transmission mechanism is broken. We are taught that rate hikes incentivise saving and cool spending, but that logic fails when inflation is driven by non-negotiable public goods like energy and food.
“People couldn’t simply ‘choose’ to stop spending on essentials; the hikes just punished them for existing in a high-cost environment. The Bank of England’s strategy was flawed from the start. Using interest rates to fight supply-side inflation was like trying to put out a fire with a hammer, it didn’t fix the issue, it just damaged the wider economy.
“Now, we see the reality: the base rate is becoming irrelevant. Banks have already baked in their margins, cutting savings rates long before any announcement. It’s a one-way street where banks are quick to protect their spread but painfully slow to pass on benefits to savers. The base rate has become theoretical, while the real economy operates on a harsh reality of eroding value.”
Michelle Lawson, Director at Fareham-based Lawson Financial, simply added: “Given all the circus going on at home and overseas right now, there was no other decision but to hold.”
