Bank Of England Holds Base Rate At 5.25%

For the first time in nearly two years, the Bank Of England (BofE) has today (22/09/23) decided against raising its base rate and opted instead to leave it unchanged at 5.25%.

In what was viewed by many as a surprise decision, the nine-member Monetary Policy Committee (MPC) voted 5 to 4 for keeping the base rate at its current level rather than raising it by a further 0.25% (which was the anticipated outcome before the announcement).

The MPC’s vote was swayed by the latest inflation data released just the day before showing a welcome reduction in both the main Consumer Price Index – down from 6.8% in July to 6.7% in August – and the core inflation figure (which excludes more volatile services such as food and energy prices) – down from 6.9% to 6.2%.

This decision brings an end to the cycle of base rate increases which started in December 2021. Since then the BofE has raised its central lending rate 14 times in a row – from 0.1% to its current position of 5.25%.

What does this mean for mortgages?

This news will be a welcome relief to thousands of homeowners who used a mortgage to purchase their property, particularly those on a variable or tracker mortgage rate which rises and falls in line with the BofE base rate, who have had to find space in their monthly finances for these recent increases.

For anyone on a fixed-rate mortgage, today’s news won’t have any impact on their monthly repayments. However, it may offer some comfort for those on a fixed-rate deal due to end soon to know mortgage rates won’t be rising again, any time soon. There is still a degree of worry for anyone in this position as remortgage rates are still much higher than they were when most two, three or five-year fixed-rate deals were completed before the base rate began to rise at the end of 2021.

What mortgage rates are available right now?

Mortgage lenders have more recently been adapting their rates in line with where they expect the base rate to be. So, the good news is that most have now started reducing their rate deals over the last few weeks from where they were in June and July.

The rates table below gives you an indication of the mortgage rates currently available.

Please note that the above rates were accurate at the time of writing, but are always subject to change at the lender’s discretion. Speaking to a mortgage broker is the best way to find the most up-to-date deals.

Will the Bank Of England now start reducing the base rate?

Whilst today’s news is a promising sign that we may be nearing the end of the BofE’s policy of raising its base rate, there’s no immediate indication that this will now prompt a reduction any time soon.

The key to when we start to see falls in the base rate is inflation. The BofE and the UK Government are both committed to bringing inflation back under control and reaching its target figure of 2% by early 2025. With this in mind, Andrew Bailey, the BofE governor, has warned that we should expect the base rate to remain at current levels for the foreseeable future.

The next Bank Of England MPC meeting is due to take place 2nd November 2023.