Interest rates decision: Bank of England holds base rate at 5.25%

by Aaron Strutt

Dec 14 2023

The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 6–3 to maintain the base rate at 5.25%. Three members preferred an increase of 0.25 percentage points to 5.5%.

In the MPC’s November Monetary Policy Report projections, the base rate was expected to stay at around 5.25% until 2024 Q3 and then decline gradually to 4.25% by the end of 2026.

However, the Evening Standard reports City markets are now pricing in a 50% chance of a first cut to base rate by the Bank as soon as March with five quarter-point cuts — bringing the rate down to 4% by the end of 2024.

The US Federal Reserve left its policy rate unchanged at 5.25 to 5.5% for the third consecutive meeting but signalled cuts of 75 basis points next year.

Earlier today Andrew Bailey, governor of the Bank of England, said: “We have made the decision to keep interest rates at 5.25%. We have taken that decision because previous increases in interest rates are working and inflation is moving in the right direction.

"There is still work to do and interest rates are likely to need to stay higher for longer to get inflation back to the 2 per cent target."

Mortgage lenders lowering rates despite base rate being held

Banks and building societies are lowering their rates despite the Bank of England base rate being held. HSBC for Intermediaries, TSB and Virgin Money are the latest big lenders to announce rate improvements.

Mortgage rates are significantly cheaper than they were, and the lenders are fighting it out to offer the lowest rates. This is something they actively tried to avoid doing not long ago.

We are now waiting for a lender to launch a sub-4% mortgage rate, which may happen quite quickly, possibly over the next month. The cheapest two, three and ten-year fixed mortgage rates are roughly priced at around 4.6%; the lowest five-year fix is available below 4.3% now.

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The information contained within was correct at the time of publication but is subject to change

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