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Bank of England holds interest rates again at 5.25%

Posted 22/03/2024 by Robyn Hall
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The Bank of England held the base interest rate at 5.25% for the fifth meeting in a row in its latest decision with an almost unanimous vote of 8-1.

Members of the Bank’s Monetary Policy Committee (MPC) led by Governor Andrew Bailey, tasked with setting interest rates in the UK, voted 8-1 in favour of keeping the base rate at 5.25%.

The vote to maintain interest rates came despite Inflation falling to its lowest level in more than two years the day before at 3.4%.

Two members of the committee who had consistently voted for a rise in interest rates favoured a hold at this meeting and one member even preferred to reduce Bank Rate by 0.25 percentage points, to 5%, suggesting that the MPC is near to agreeing that a reduction in borrowing costs is appropriate.

Although inflation has been falling and is expected to fall further the Bank is under strict rules to ensure that inflation hits its target of 2%.

That being the case, the decision to maintain rates at their current 16-year high was widely expected by City analysts.

However, the 8-1 decision surprised some as it was the first time that no members of the MPC have voted for a rate rise since September 2021.

Some mortgage lenders had already lowered their own rates perhaps expecting the Bank to take action – especially on the back of falling inflation figures.

But the Bank’s Governor Andrew Bailey stressed that it was ‘not yet’ the time to cut interest rates, despite ‘further encouraging signs’ that inflation is coming down.

The Bank has to be sure that inflation will reach the Government’s 2% target and ‘stay there’, he said.

“We’re not yet at the point where we can cut interest rates, but things are moving in the right direction,” he added.

Matt Smith, Rightmove’s Mortgage Expert, reckons it’s very much a ‘when’ rather than ‘if’ we see the first drop from 5.25%.

“Mortgage rates have risen slightly over the last six weeks, but it does feel like the pressure on lenders to increase rates has dissipated, with some lenders having already cut rates in response to yesterday’s positive inflation new,” he said.

“This may mean that average mortgage rates start to fall back in the next couple of weeks. If this is the case it will be first time average rates will have reduced in over a month.”

“Home-movers shouldn't expect to see a rush of rate cuts, but the two announcements this week should hopefully continue to give movers more confidence than they perhaps had at the start of last year.

“That's certainly been the theme so far after the first quarter of the year - with more people enquiring to purchase homes, more sellers come to market and more sales being agreed than this time last year."

And Jason Tebb, President of OnTheMarket, added: “With the fifth hold in base rate in as many meetings and inflation appearing to be increasingly under control, buyers and sellers will be wondering when the Monetary Policy Committee is going to start reducing rates.”

“As we move into Spring and what is traditionally a busier time of year for the housing market, a rate cut would be timely, boosting confidence, activity and transactions, which are so important for the housing market and wider economy,” he said.

“The flurry of activity and interest suggests the worst of the nervousness about the market is behind us. With buyers and sellers keen to get on with their moves after a period of sitting on their hands waiting for mortgage rates to improve, a rate reduction would provide further encouragement.”


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Please be aware that the information provided within these archives has been pre-published, as of the date published on each article. The information contained within, including references to taxation, legislation, regulation, or any other issues or concerns may no longer apply.

Robyn Hall

UK Property and Finance Expert

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