Bank of England leaves rates unchanged

Today's decision to keep interest rates on hold will be broadly welcomed, especially by those with variable-rate mortgages and other debts. Mind you, the Monetary Policy Committee decision was not unanimous, with 3 of the 9 members voting for an increase. We can't assume that interest rates have peaked just yet. Interestingly, the forecast for economic growth has been downgraded, with expectations of a static economy until after the next General Election. As always, there's little to be gained from speculation, so best to plan your own personal finances with a degree of caution and be prepared for multiple scenarios.

No surprise the Bank of England held the base rate at 5.25%, and this time the vote was less close, 6-3 in favour. The bad news is the Bank is predicting weaker GDP growth than expected of just 0.1% in Q4. Nevertheless, it feels like interest and mortgage rates may have peaked, and I suspect they'll now fall quicker than many are predicting, though the days of ultra-low mortgage deals are long gone.

Rates may have been left on hold but higher for longer is killing small businesses. Homeowners only feel the pain when their fixed-rate deals end. Small business owners have been hurting for years now, dealing with enforced lockdowns, supply-chain issues, a lack of skilled workers, a gloomy economic outlook and sky-high inflation and interest rates. Interest rates being left unchanged is welcome but for many it will be too little, too late.

The Bank of England has sadly decided to go along predictable lines and hold the rate at 5.25%. In the face of zero growth that the Bank is projecting for 2024, this is perhaps the wrong decision at this time. I would have expected the Bank to be more radical and give consumers and businesses more confidence and an incentive to spend their money, which would ultimately boost economic growth. A 6-3 decision in favour of holding the rates is actually closer than you would like to think. CPI inflation is expected to fall in the near term, reflecting lower annual energy inflation that we have seen over the last quarter. All it takes is two MPC members to change their minds, and hopefully, we will see the first interest rate drop in the last MPC meeting scheduled for December 2023.

Although CPI remained stagnant in September, the MPC has made better judgement in acknowledging that inflation will continue to fall in the months to come and have opted for another pause today. With rate cuts expected as soon as Q3 2024 and an increasing number of cuts through to 2026, it seems like the rate-hiking cycle has officially come to an end. Wage growth is tapering off and the services PMI figures have been in contraction, while the BRC's latest shop price inflation also saw disinflation. Swap rates are also falling, which will lead to more mortgage rate cuts, hence why housebuilders and banks are rallying today. That said, markets shouldn't get complacent. While inflation is expected to continue falling, sticky services inflation may continue to present a problem in getting CPI back down to the Bank of England's target of 2%. This could lead to unpleasant surprises as Andrew Bailey and his cohort may opt to leave rates higher for longer.

With the housing market and wider economy showing increasing signs that the medicine of higher interest rates is working, a pause by the Bank of England is sensible. The aim is to cure the economy of the scourge of inflation, not mortally wound it by choking off growth unnecessarily.

Hot on the heels of this week's better-than-expected house value figures, the Bank of England has chosen to leave the base rate as it is. This decision reflects a cautious approach, balancing the challenges of inflation with the potential risks of recession. For homeowners, those on variable rate mortgages and the bravest mortgage lenders who have been reducing rates ahead of this decision, it's a huge sigh of relief.

This is a welcome result. While inflation remains static, a bedding-in period is to be expected with any new monetary policies. We’ve already faced tumultuous times within the lending market, with rates all over the place. Today’s decision will keep the peace and provide stability. As we head towards the end of 2023, I’m sure many will be relieved to hear today’s news.

The Monetary Policy Committee's decision to hold the base rate at 5.25% will be music to the ears of UK mortgage holders. This will inject positivity and calm into the general public and should allow 2023 to end on a high, something we definitely need after a turbulent year.

Millions of households and businesses will breathe a huge sigh of relief on the back of today's announcement by the Bank of England to keep the base rate on hold. This is the correct decision and those members that voted to keep the rates on hold should be applauded. This is the 2nd meeting in a row that rates have been kept on hold and it will be interesting to see what happens at the next meeting.

With a flurry of rate reductions from lenders this week, it certainly felt that there would be positive news from the MPC meeting today. With the base rate holding now for the second consecutive meeting with a more positive vote than previously now starts the long slow process of recovery with interest rates set to continue to reduce but at a very slow rate. We are now at the top of table mountain, and are just waiting until inflation is at a level where the base rate can start to be cut.