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BoE base rate decision: Interest rates hold at 5.25%

The Bank of England has chosen to hold interest rates at 5.25%, but what does this means for UK consumers and spending in 2024?

A photo of Daniel Sharpe-Szunko, the author

By Daniel Sharpe-Szunko

Published on: 2 February 2024

4 min read

BoE base rate decision: Interest rates hold at 5.25%

Yesterday (1st February 2024), the Bank of England’s Monetary Policy Committee (MPC) chose to hold the UK’s base rate of interest at 5.25% for the fourth consecutive vote. This decision came in spite of the Bank of England stating that they were willing to consider interest rate cuts this year.

Currently, the Bank of England (BoE) want to see more evidence that inflation will continue falling before committing to lowering the UK base interest rate. However, the fact that inflation has fallen to 4% (from a peak of 11%) has meant that the BoE no longer see the need for increasing rates which can only be positive for UK consumers.

With interest rates holding steady, this marks a definite shift for the economy following the two year campaign which saw consistent ongoing rate rises from the UK’s central bank. High rates combined with peak inflation caused significant financial difficulty for families and business across the UK, so it is good to see that there appears to now be a ‘light at the end of the tunnel’.

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60-Second Summary – BoE base rate decision: Interest rates hold at 5.25%

For the fourth consecutive vote, the BoE Monetary Policy Committee maintained the Bank of England base rate at 5.25%. But what does this means for UK consumers and financial products like mortgages in 2024?

  • With inflation now at 4% (down from 11%), the Bank of England no longer sees the immediate need for rate increases, with the current rate having been in place since Summer 2023
  • Financial experts anticipate a potential decrease in the base rate throughout 2024 and into 2025, which could mean lower rates being introduced for products like loans, credit cards, savings accounts and mortgages
  • Mortgage rates are influenced by various factors including the BoE rate, and while current rates are low, it’s uncertain if they will continue to fall in the long term. Anyone looking to buy a home or remortgage this year might find it useful to get some proper advice first from a qualified mortgage broker.

The Bank of England has chosen not to increase or decrease the UK’s base rate, with the rate holding steady at 5.25%.

The UK’s Monetary Policy Committee has shifted focus from restricting interest rates to instead evaluation how long the current rate needs to be in place for to help boost the UK economy. The majority of committee members voted for rates to remain at 5.25% for the time being, though financial experts are hopeful that this rate will decrease throughout 2024 and into 2025.

The Bank of England’s forecast suggest there could be a temporary drop in inflation later this year to the UK’s target rate of 2%. This isn’t expected to last though, with an increase expected to follow this later in the year. The central bank predicts inflation remaining above target for most of the forecast period, with rates not expected to be cut as aggressively as some investors assume.

How do interest rate changes affect UK consumers?

Interest rates apply to most type of financial agreements (e.g. loans, mortgages, credit cards) in the UK, where you will need to repay the initial amount borrowed plus an extra amount.

This is usually a percentage of the original loan or credit amount and most banks or building societies will set these rates with the Bank of England rate in mind. Interest rate rises will impact the amount you need to repay each month, so they’re definitely something to watch out for if you don’t have a fixed rate.

If Bank of England rates are higher, you may find it tougher to find low interest rate deals for new financial products or end up with higher monthly payments if you’re currently on a variable rate mortgage for example.

You should always think carefully about if a product’s interest rate is something that is actually affordable for you long term as it means your monthly costs will be higher. It’s normally worth checking prices and rates with a few providers, whether you gather quotes yourself, use a comparison site (e.g. MoneySupermarket) or speak to an experienced broker.

It’s possible that the BoE could raise interest rates in the future, especially if events occur that have a significant impact on the UK’s economy. Previous events that led to the current higher rates included Brexit, the coronavirus pandemic and the 2022 Autumn budget proposed by Liz TrussConservative government.

At the moment, it appears that rates are likely to hold steady or decrease slightly throughout 2024. The Bank of England has hinted that a cut is likely to happen at the next Monetary Policy Committee vote, but it is possible that things could change between now and then.

The next MPC meeting is scheduled to be held on Thursday 9th May and all the upcoming meeting dates can be found on the Bank of England website: Bank of England – Monetary Policy Committee dates for 2024 and 2025

There are a lot of factors that affect the mortgage rates that lenders in the UK will offer, so it’s hard to say for certain if rates will continue to fall longer term. Rates are far lower than they have been at the moment though, with lenders like Co-op, HSBC and Santander announcing low fixed rate mortgage deals within the last month.

If you are thinking about buying a home or applying to remortgage this year, you may want to act now to ensure the deals on offer currently are still available. For those wanted to switch, move or buy later in 2024, the best way to predict if rates may be higher is to assess any further Bank of England announcements as well as any other economic events that may have an impact.

If you aren’t sure of your best options for mortgages, many consumers find it useful to get some extra advice from a qualified mortgage broker.

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