Bank of England leaves rates on hold at 5.25%

Today’s announcement by the Bank of England to maintain the base rate at 5.25% was in line with market expectations, and reflects a prudent approach during the festive period. This decision underscores the necessity for stability, a vital component for businesses planning to invest and grow in these uncertain times. However, recent economic indicators, including this week’s GDP’s figures indicating a contraction in the economy and a dip in inflation, coupled with the ongoing trend of rate reductions by lenders, are intensifying the dialogue about the potential for a downward adjustment in the base rate by Threadneedle Street earlier than originally expected.

In recent days, the markets are forecasting 4 to 5 interest rate reductions in 2024 even though the Bank of England remains more hawkish than the Federal Reserve. However, lenders are likely to withhold their significant price reductions until the beginning of the New Year. That's a wrap for 2023.

This was the right decision, especially for borrowers right before Christmas. We are eager to see stability in the mortgage and property markets in 2024 and a chance for borrowers to settle into the new norm of higher rates. Lenders are currently offering lower rates than they have for the past few months now, so it's a good time to review your remortgage if you are within 6 months of your current deal.

To see the base rate held at 5.25% for the 3rd month running is definitely what the markets had been expecting. For those with tracker mortgages there will be no changes, but for those looking to renew their mortgage products over the coming months we should see more fixed rate cuts over the next few months given how the money market will react to this hold position. However, we always need to watch inflation figures and other worldwide factors such as fuel costs, as we have seen before how quickly rates can change for the worse and can wipe out much of the good work of the past 3-4 months. Early preparation for renewals is vital. This is largely a positive decision from the Bank of England today.

This announcement is just as we inspected. I think we will see another hold on 1st February as well. This week's GDP data may well have influenced this decision and swap rates have also been coming down. It's a good end to the year and brings some confidence to those looking for a mortgage, and injects much-needed stability into the wider housing market.

The Base Rate was widely expected to be maintained at 5.25%, however, three of the nine members of the committee voted to increase it again which is interesting, as they must clearly feel that inflation isn't falling at the required rate. This comes off the back of the US Fed stating that they expect to be able to reduce rates next year. It's interesting to see what the Bank of England says about the UK's position about the timing of rate reductions. This latest update will be welcome news to business and mortgage holders, especially as potentially up to 1.6 million people are coming to the end of their mortgage deal in 2024. Mortgage lenders are battling it out to be top of the best buy tables. Hopefully with the news today, this will allow them to be more aggressive and continue to reduce the cost of fixed-rate mortgage products into the new year.

As expected the rate was held, but wouldn’t it have been nice to see them lower it to 5%? The Government and MPC didn’t act quick enough to tackle inflation in the first place, and then when they did act, they did too much too quickly, and now we are heading towards a recession. For once they should try something different. You never know, it might just work. We all know that inflation is dropping, despite Rishi and Jeremy claiming the benefit for something that was happening anyway. We also know that next year more than 1.4 million homeowners are going to be coming off low mortgage rates and onto higher ones. The base rate is expected to drop next year, so why prolong the pain of businesses and households?

In a delicate dance between controlling inflation and supporting economic growth amidst global economic headwinds, the Bank of England has decided to maintain interest rates at 5.25%. While the government has passively watched the situation unfold throughout the year, evidence now points towards a slowing UK economy, with GDP growth declining and consumer confidence hitting an all-time low. If this was a boxing match between the Bank of England and the Government, Threadneedle Street would likely hold a slight edge due to its perceived superior expertise, while the Government's mixed objectives would hinder its chances of victory. The government must develop a cohesive strategy and unwaveringly adhere to it to have any hope of success, though some may argue that their current inaction itself serves as a strategy.

This should keep the steady end to 2023 on a path to continue into the early part of 2024. Pending any further surprise shocks or conflicts around the world, I don't expect to see any change to the base rate until well into Spring at the earliest. There still appears to be room for further fixed rate drops in both the traditional mortgage market and the later-life sector, which will I'm sure see a flurry of property transactions happening in the new year as consumers are buoyed by sub-5% fixed rates for traditional mortgages and sub-6% rates for lifetime products.

Whilst it was a long shot, it is still disappointing that the Bank of England did not take the opportunity to spread some festive cheer with an early cut. Given the economic outlook, it seems that we will be going into the New Year with interest rates at a higher level than they need to be, and there is an increasing sense that a rate cut will need to happen sooner rather than later. Inflation is still on close watch, but with thousands more mortgage holders set to come off low fixes into a higher rate environment and wage growth starting to ease, the Bank could find themselves yet again behind the curve. The good news is that in recent weeks in the money markets, SWAP rates have started to fall markedly and mortgage lenders are entering 2024 in competitive mood, keen to hold onto their existing customers and attract more to increase or maintain their market shares. The result should be a busier than expected time for the mortgage and property markets in the early stages of 2024.

This was the most predictable result, I don't think anyone expected anything other than a hold this month. It is probably the right decision at the moment and allows the Monetary Policy Committee to see how things settle before the next decision in February. I would expect another hold then too, with hopefully the first reductions in March or April.