Bank of England holds base rate at 4.25%

Wed 25 Jun 2025

The Bank of England’s Monetary Policy Committee has voted by six to three in favour of keeping its base rate on hold at 4.25%.

It was a decision that had been widely anticipated, as stubbornly high inflation and events in the Middle East have given it little room for base rate manoeuvre.

When the base rate was cut in May from 4.5% to 4.25%, that was the third reduction this year. The month before, the money markets were predicting up to four further reductions. The picture, though, has changed considerably since then.

In April, there was a shock rise in inflation to 3.5% (later revised to 3.4%) and the latest figures show that it was no blip, with May’s figures again above expectations at 3.4%.

And, with the conflict between Israel and Iran already pushing up energy costs and the effects of Trump’s tariffs still unclear, the Bank is unlikely to be able to get inflation below its 2% target for some time to come.

The Bank  is under pressure to stimulate a struggling economy that saw a shock 0.3% contraction in GDP in April. It says of the decision: “The Committee will remain sensitive to heightened unpredictability in the economic and geopolitical environment, and will continue to update its assessment of risks to the economy.”

In better news for the property industry, the money markets are still expecting more cuts, but only one or two and later in the year, with inflation remaining above 3%.

For the housing market, this decision provides stability rather than a new stimulus. The benefits of the May rate cut are still filtering through, with recent sub-4% mortgage headlines helping boost market activity to a four-year high for agreed sales. This ongoing momentum, coupled with lenders relaxing affordability criteria, means the market is well-placed to continue its resilient performance.

While a further cut would have been welcome, the hold ensures the market remains on a steady footing. The balance between buyer demand and a healthy increase in housing supply will continue to support transaction levels while keeping price growth in check. All eyes will now be on the next set of inflation data to signal the Bank’s future direction.