Bank of England base rate paused at 4.50% ahead of Spring Statement

But both mortgage and savings rates trend downwards following last month’s cut.

With the Spring Statement less than a week away, the Bank of England’s Monetary Policy Committee (MPC) took a neutral stance in its meeting today by maintaining the base rate at 4.5%.

This falls in line with many economists’ expectations. While inflation easing at the end of last year paved the way for the MPC to cut the UK’s central interest rate in February, more recent figures showed the rate at which costs of goods and services are rising reaccelerated to 3.0% in January.

Nevertheless, some may argue the base rate should be lowered in the coming months in a bid to encourage spending after it was revealed last week the UK economy unexpectedly shrank by 0.1% in January. But, with the next MPC meeting not set to take place until May, the committee now has ample time to digest the impact of any measures announced by the Chancellor next week and respond accordingly.

Still reason for borrowers to be optimistic

Many of the millions of borrowers coming to the end of a fixed mortgage deal this year might have also preferred to see the base rate reduced for a second consecutive month. While such changes tend to predominantly influence variable rates, lenders often consider base rate forecasts when setting their fixed pricing. In the aftermath of last month’s cut, the average rate charged by a two-year fixed deal fell from 5.52% to 5.39% between the start of February and March, according to Moneyfacts’ data. Meanwhile, the average five-year fixed mortgage rate declined from 5.32% to 5.22% over the same period.

This positive momentum “couldn’t be better timed”, said Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, with many borrowers “rushing to meet the stamp duty deadline at the end of March 2025”.

While it may be too late for those currently comparing deals to take advantage of the temporarily heightened nil-rate threshold, Oliver Dack, Spokesperson at Mortgage Advice Bureau, said there is “still reason for borrowers to be optimistic as the general consensus remains we’ll see further cuts this year.”

“We expect it to be a busy time for remortgage borrowers – some of whom locked in a much lower rate five years ago and others who will perhaps find prices similar to when they booked their mortgage only two years ago,” he added. In any case, Dack encouraged those with an expiring deal “not to hesitate in securing a new fixed rate if they want to avoid falling onto a lender’s costly Standard Variable Rate (SVR)”.

This is because, despite the average SVR falling considerably from 8.18% in March 2024 to 7.68% at the start of this month, borrowers would pay over £350 more each month at this rate than if they had opted for a typical two-year fixed deal^*.

Respite for savers

In contrast, savers may be hopeful for a brief reprieve from declining returns. With providers quick to pass on last month’s cut to their variable ranges, the average rate paid by an easy access account fell from 2.92% to 2.85% month-on-month and the average returns on a notice account dropped from 4.00% to 3.86% over the same timeframe. “It may be the season for cash ISAs, but they have sadly not been immune to rate cuts,” Springall also added. Typical returns on a notice ISA fell from 3.92% to 3.79% month-on-month, while the average rate paid by an easy access ISA saw a more modest 0.03 percentage point decline to 3.03%

Nevertheless, she emphasised this “should not deter savers from taking full advantage of their ISA allowance before the 2024/25 tax-year ends” and that attractive rates can still be found – particularly from lesser-known challenger banks. What's more, in spite of the wider trend, competition in the easy access ISA market has reignited over recent weeks as providers attempt to entice consumers looking to make use of this year’s allowance before it automatically resets once the new tax-year begins. As a result, the very best rates in this sector currently sit in excess of 5.00% AER.