The Bank of England have voted 6-3 to hold interest rates at 5.25% for a second month in a row. This marks a contrast to the 5-4 vote back in September, where the central bank was narrowly in favour of keeping rates unchanged.
Bank ‘holds’ rates – What does it mean?
When the Bank of England chooses to “hold” interest rates, it indicates that they’ve opted to keep the current interest rate level intact at 5.25%. This decision follows 14 consecutive rate increases, from the historic low of 0.10% in December 2021.
While it may seem like a positive development, especially considering the recent rate hikes, it’s worth noting that the Bank of England still presents a somewhat grim outlook for the UK economy.
Andrew Bailey, the Governor of the Bank of England, emphasised the need for vigilance, stating, “Let me be clear, there is absolutely no room for complacency. Inflation is still too high. We will keep interest rates high enough for long enough to make sure we get inflation all the way back to the 2% target…we think that, other things being equal, interest rates will have to remain where they are now for an extended period of time to get inflation back to target.”
Andrew Sheen, Director of Thameside Mortgages, noted that the decision to maintain rates at 5.25% was widely anticipated, “as experts in the industry are predicting that rates are likely to remain stable, possibly with a shift towards easing policy in late 2024. However, as history has shown, economic landscapes can change rapidly due to external factors beyond the Bank of England’s control, making it challenging to predict the future course of action”.
Are we going to see an improvement in mortgage rates?
The answer to this question remains uncertain, as mortgage rates offered by lenders typically hinge on market confidence and competition among banks and building societies. Two consecutive months of holding the base rate might suggest that we’ve reached a peak, and rates are less likely to surge higher, potentially encouraging more competition among lenders.
In recent months, rates have been gradually becoming more competitive, particularly after a period of limited activity. Brokers are cautiously optimistic that this trend will persist, with slight improvements expected in fixed-deal mortgage rates.
Nevertheless, it’s essential to bear in mind that mortgage rates are still notably higher than they were two years ago. Individuals transitioning from ultra-low fixed rates could still face an adjustment in their payments compared to what they’ve been accustomed to in recent years.
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Overall, the decision to keep interest rates unchanged reflects a cautious approach by the Bank of England in light of changing economic conditions. It highlights the importance of monitoring inflation and making policy decisions that aim to maintain price stability and support economic growth. The central bank’s readiness to adapt its stance in the future underscores the dynamic nature of monetary policy.
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A mortgage is a loan secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other loan secured on it. The Financial Conduct Authority does not regulate most forms of buy to let mortgage.