Bank maintains interest rate at 5.25%

21st September 2023
Home > News > Bank maintains interest rate at 5.25%

Reported by David Callaghan the Negotiator

The base interest rate remains at 5.25% after the Bank of England’s Monetary Policy Committee voted 5-4 against an increase. Many commentators had expected another rise in the rate, but the surprise fall in inflation probably prompted a rethink.

Inflation fell slightly last month to 6.7% from 6.8% in July, prompting some analysts to predict that the Bank would steer away from a rate rise.

DIVIDED

But there were divided opinions on whether the Bank would still go for a rise to ensure inflation was under control.

Last month the MPC decided by a spilt vote to raise rates in the face of rising inflation.

The base rate has been rising since the end of 2021, with last month being the 14th consecutive increase.

IMPACT

The impact on homeowners with mortgages has been severe, as rates have risen dramatically albeit with a levelling off recently.

Mortgage rates will now be watched closely to see if they fall in the next few months.

Nicholas Mendes, mortgage technical manager at John Charcol, says: “Yesterdays unexpected inflation 6.7% announcement in August eased some of the pressure on the Bank of England decision making on whether to continue increasing interest rates.

“Moments after yesterday’s inflation announcements market expectations of a rate rise began to plummet, from what was an 80% certainty of a further rate hike down to an equal split,” he says. “There has been a steady decline in swap rates in recent days, which has resulted in many lenders reducing rates on both residential and BTL products, which is welcomed news for mortgage holders.”


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