Bank of England holds UK interest rates at 4.25%

The Bank of England held interest rates steady as expected, with the path to lowering borrowing costs appearing to contain more twists and turns than previously anticipated, while economic growth remains a key concern. Uncertainty around the impact of Trump’s tariffs and the spike in oil prices due to conflict in the Middle East has created an ongoing sense that another shock may be imminent.

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“The central bank appears to be adopting a ‘wait-and-see’ approach, seeking greater clarity on how Trump’s trade policies will evolve, with an 8 July deadline for completing trade talks with various countries before higher US tariffs take effect. How severe those tariffs may ultimately be is anyone’s guess.

“The concern is that the BoE risks fuelling inflationary pressures if it moves too quickly to lower rates, which are expected to flare up again as a result of the tariffs. However, waiting too long could mean missing the opportunity to stimulate economic growth.

“As ever, the BoE’s base rate decision has a domino effect on most borrowing and savings rates. Mortgage rates have remained relatively stable in recent weeks, in line with expectations that the Bank would hold rates. However, no change also means there will be no further reprieve for the 600,000 homeowners with mortgages that track the Bank’s rate.

“Savings rates have also seen little movement in recent weeks, although the overall trend has been downward. Shopping around for the best savings deals before they disappear remains a wise strategy. Those who can afford to lock away their money for five years or more should consider investing, as this offers the potential for long-term, inflation-beating returns that significantly exceed current savings rates.”