On 5 February, the Bank of England’s Monetary Policy Committee voted 5-4 in favour of keeping the bank rate at 3.75%. This contrasted the overall prediction that the vote to keep the bank rate at 3.75% would be voted 7-2 or 6-3. Following the 5-4 narrow decision last week, there is a general expectation that interest rates will be cut sooner than initially expected.
Prior to this, some experts adopted a cautious view regarding the extent to which mortgage rates would be reduced in 2026, particularly compared to the significant reduction of the bank rate from 4.75% in January 2025 to 3.75% in December 2026.
Contextual Circumstances
In the lead-up to 5 February, the markets were predicting an overall 4.1% chance of the Bank of England reducing the bank rate, citing concerns that the UK economy is expected to grow more slowly than expected. In particular, the Bank of England has lowered its outlook on the UK’s annual GDP growth in 2026 from 1.2% to 0.9%. In a Bloomberg survey, only 1 out of the 32 economists expected a bank rate reduction.
Aaron Shinwell, the chief lending officer at Nottingham Building Society, encapsulated the general expectations heading into the 5 February meeting: ‘Mortgage rates are now at their lowest levels since 2022, creating real opportunities for anyone looking to buy or remortgage. Although a rate cut this month looks unlikely, rates have already passed their peak and could gradually edge down over time, which [is] good news for the 1.8 million borrowers expected to remortgage this year and first-time buyers finding a more realistic route onto the property ladder.’
Further, Matt Swannell, the chief economic adviser at the EY Item Club, expected that a hold on the bank rate was a ‘near certainty’, a view based on the Bank of England remaining concerned regarding inflationary pressures.
Caution has been raised following a slight increase in inflation to 3.4% in December 2025, which has widened the gap for the inflation target of 2.0% that the Bank of England has set. Concurrent is the slight uptick in national employment from the initial forecast of 5% to 5.3%.
Accordingly, it was no surprise to many industry experts that the Bank of England held the bank rate at 3.75%. What was noteworthy, however, was the insistence by the Bank of England that the bank rate is likely to fall more quickly than anticipated.
Bank Rate Expectations
In a press conference, Bank of England Governor Andrew Bailey emphasised that the 5 February meeting was ‘one of good news’. Bailey cautioned that the Bank of England ‘need[s] to see some more evidence that we are on a sustainable path’. Yet Bailey argued that the Bank of England is thinking that ‘inflation will fall back to about 2% by the spring’, which would allow ‘scope for some further reduction in bank rate this year.’
Even before this announcement, there was ongoing discussion that the bank rate would be cut sooner based on the narrow margin that the bank rate was held on the 5 February meeting. Lindsay James, an investment strategist at Quilter, commented: ‘This is a much closer split than had been expected, and the Bank’s stance has shifted somewhat, clearly outlining that it expects rates to be cut further based on the current evidence’.
Consequently, the expectation is that the next bank rate reduction is likely to come soon. Paul Dales, the chief UK economist at Capital Economics, said: ‘We’ve pencilled in the next cut for the meeting in late April, but wouldn’t completely rule out March.’
As such, the overall expectation is that a 0.25% bank rate reduction is likely to arrive either on 19 March or 30 April, contingent upon how general economic conditions unfold over the coming period.
‘With further rate cuts anticipated in 2026,’ Guy Gittins, the CEO of Foxtons, said, ‘buyer confidence remains high and we’ve seen the expected seasonal uplift in enquiries, viewings booked and offers being made. We anticipate this positive momentum from buyers and sellers will be sustained, creating a strong platform for the year ahead.’
Overall Perspective
While the decision to halt the bank rate reduction may be disappointing, it is worth stressing that the property market continues to perform well. Marc von Grundherr, the director of Benham and Reeves, observed that ‘enquiry levels, viewings, and transaction volumes have remained robust, underpinned by improving confidence and more stable economic conditions’.
This performance has led the Bank of England to reassure the public that the 5 February decision to keep the bank rate unchanged does not signal a prolonged pause. On the contrary, the Bank of England has emphasised that the bank rate will drop again soon, and this has resulted in industry experts pointing to either 19 March or 30 April as the date to expect the next bank rate cut.
