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Bank of England interest rates hold at 5.25%

In some good news for the UK mortgage market, the Bank of England has today voted to leave interest rates at 5.25%

A photo of Grace Lynch, the author

By Grace Lynch

Published on: 21 September 2023

3 min read

Bank of England interest rates hold at 5.25%

In some good news for the UK mortgage market, the Bank of England has today voted to leave interest rates at 5.25%. This is the first time in almost 2 years of votes that the BoE rate hasn’t risen, signalling a positive step forward for mortgages and the housing market.

Following on from 14 consecutive rate rises, this latest vote indicates the financial pressure on the UK economy might finally be starting to ease off. It had been expected the rate would continue to rise throughout the rest of 2023.

Current Bank of England Base Rate5.25% (as of 03/08/23 – NO CHANGE)
Previous Bank of England Base Rate5.0%
Expected Interest Rate Peak5.75% by end of 2023 (based on previous data, it is possible the UK has now hit the peak at 5.25%)

More about mortgages:

It had been widely assumed that rates would rise again at this Monetary Policy Committee meeting, as they have in the previous 14 votes. However, the inflation data published earlier this week was much more positive than expected. The UK’s base rate of inflation now sits at 6.7%

Sky News has described the outcome of this latest vote as the ‘most exciting non-event in recent economic history’.

Inflation rates have begun falling, though it is still believed they will average out at around 7.2% this year. This is still over 3 times higher than the Bank of England target of 2%.

This led to a very tight vote by the MPC with the committee voting 5 vs 4 to leave the rates unchanged. The deciding vote was cast by Andrew Bailey, the governor of the Bank of England.

Will interest rates begin to fall now?

There is no guarantee that the BoE rate will fall at the next vote just because it didn’t rise this time. There are a lot of factors at play here and the vote for the interest rate to hold steady only just passed. Many people described the vote as a ‘knife-edge’ outcome that could have gone either way.

Four members of the MPC voted for interest rates to rise a further 0.25% (meaning a 5.5% base interest rate for the UK). This was due to ‘persistent’ pressure on inflation, despite inflation having started to fall.

How will mortgages be affected?

Though the BoE rate holding steady indicates future mortgage rates dropping, current mortgage holders might not benefit any time soon.

Mortgage rates are still going to be way higher than they were even 2 or 3 years ago. Anyone coming towards the end of a fixed rate mortgage will still feel the impact of the recent economic uncertainty.

Following the last rate rise, banks and other lenders did start to cut interest rates. Lenders that cut mortgage rates last month include

Ultimately how you are affected will come down to your lender and the type of mortgage you have. Anyone with a tracker mortgage will always be directly impacted by the BoE rate so the latest vote at least means their rates shouldn’t increase for now.

If you are worried about your mortgage and need some advice, it’s a good idea to speak to a qualified mortgage broker. A mortgage broker will be able to help you assess your current mortgage and work out if there are any better options available to you.

Related articles

Here are the latest MPO news articles about news affecting mortgages and house prices in the UK in 2023.

To keep up with that latest mortgage updates, check out our MPO News page.

Resources

Bank of England – Interest Rates and Bank Rate

Nationwide – Bank of England base rate changes and your mortgage

Statista – Average interest rates for mortgages in the UK (2000 – 2023)

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