The Bank of England (BoE) has announced its latest decision on the base rate, choosing to hold it steady at 4%. This outcome was widely expected by financial markets following the release of new inflation data yesterday, which showed the rate of inflation holding firm at 3.8% – still well above the Bank’s long-term target of 2%.
By holding the base rate rather than cutting it further, the Bank is signalling its determination to keep inflation under control. In its official statement, the Monetary Policy Committee said it “remains focused on squeezing out any existing or emerging persistent inflationary pressures, to return inflation sustainably to its 2% target in the medium term.”
Put simply, the Bank believes inflation is levelling off and expects it to fall gradually over the coming months.
Will interest rates continue to fall?
Financial experts are cautiously optimistic that interest rates will continue to edge down, though progress is likely to be slow. Some analysts, such as Deutsche Bank, predict a further rate cut in December, but others warn that much will depend on wider economic conditions and the Government’s upcoming Budget on 26 November.
What does this mean for homebuyers and those remortgaging?
While the pace of rate cuts has slowed, the outlook for borrowers is significantly better than it was two years ago. Average mortgage rates have been gradually easing, making conditions more favourable for those purchasing property or looking to remortgage.
Sarah Coles, head of personal finance at Hargreaves Lansdown, noted that “fixed mortgage deals have been drifting gradually down for some time, with the average two-year fixed rate falling from 5.2% four months ago to less than 5%, according to Moneyfacts.”
For context, the average two-year fixed deal stood at 6.85% in August 2023. This drop represents thousands of pounds in potential annual savings for households with average-sized mortgages. However, Coles cautioned that “rates are not going anywhere fast,” suggesting buyers should not wait indefinitely for lower offers.
If you are planning to move home or refinance your mortgage, it may be wise to take advantage of the current market rather than delay important life decisions in the hope of lower rates that may take time to arrive.
Looking ahead
The Monetary Policy Committee will meet again to discuss the base rate on 6 November, ahead of the Chancellor’s Budget later in the month. Both events could shape the outlook for interest rates into the new year.
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