BoE holds interest rate at 5.25%

The Bank of England’s Monetary Policy Committee has decided to hold the base rate at 5.25% – for the fifth meeting in a row.

The current rate, which was set last August, is the highest for nearly 16 years.

Economic experts are predicting that rates will fall later this year.

A key tool in controlling inflation is to use interest rates.

The UK’s rate of inflation peaked in October 2022 but fell in 2023 and is now at 3.4%.

The Bank’s target is 2% – which means that interest rates will remain high or won’t be reduced quickly until this target is met.

The Chancellor Jeremy Hunt says that as inflation reaches closer to its 2% target, it ‘opens the door’ for the BoE to consider reducing interest rates.

He said: “It’s far too early to know whether we’ll have another fiscal event before the election, but what I would say is that what you can see is the difficult decisions the government has taken over the last year are paying off.”

‘Not yet’ time to cut interest rates

Speaking after publication of the interest rate hold, the Bank of England Governor Andrew Bailey said it is ‘not yet’ time to cut interest rates.

He did say there are ‘encouraging signs’ that inflation is coming down, and he points out that policymakers need to be reassured inflation will fall to the Bank’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.”

Monetary Policy Committee voted 8-1 in favour

The Bank’s Monetary Policy Committee voted 8-1 in favour to keep interest rates unchanged at 5.25%.

One member preferred wanted to reduce the base rate down to 5%.

The last time the committee voted on interest rates in February, it voted to hold interest rates with a majority of 6-3.

There are nine committee members including the governor Andrew Bailey, along with three deputy governors, plus the bank’s chief economist.

There are also four external members appointed by the Chancellor.

‘Base Rate cut always felt like a bridge too far’

Rob Clifford, the chief executive of mortgage and protection network, Stonebridge, said: “Even with the announcement of yesterday’s fall in inflation, a Base Rate cut always felt like a bridge too far for the MPC at this month’s meeting; although, with the OBR forecasting inflation will hit the 2% target in the next couple of months, it feels like we are not a million miles away from that first highly-anticipated BBR cut.

“In the meantime, the likelihood is that mortgage product rates are not going to move much in the coming weeks, and we must also recognise that, even with a cut, there won’t be a huge shift downward in pricing.

“For advisers, it is therefore all about making their customers aware of this and continuing to provide solutions based on the market as it is today, not what it was in the past or what it might be months down the line.”

The property sector reacts to the Bank of England’s rate hold:

The chief of Octane Capital, Jonathan Samuels, said: “Many have been critical of the Bank of England’s tentative approach to initially increasing interest rates, myself included, and had they acted with more gusto to begin with, it may have tamed the stubborn trajectory of inflation sooner.

“Nevertheless, we’re now starting to see inflation ease and while swap rate movement remains unpredictable at present, there’s hope for homebuyers yet that a reduction in interest rates is on the horizon, which should settle the market and bring mortgage rates down over time.”

The co-founder and chief executive of GetAgent.co.uk, Colby Short, said: “Having reached the peak with respect to interest rates, the only way is down from here and homebuyers across the nation will have been hoping that today was the day we started our descent.

“Unfortunately, we look set to remain where we are for that little bit longer and although today’s decision won’t kick start the market, it certainly won’t slow the momentum that has been building in recent months.

“Buyer activity is on the up, offers are being made and sales are being agreed and we’re already seeing the resulting green shoots of positive house price growth as we enter the spring selling season and what is traditionally the busiest time of year for the UK property market.”

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