Mortgages, will they ever stop increasing: interest rate hikes paused
Following the news of inflation falling yesterday, the Bank of England announced today that interest rates would remain at 5.25%.
This afternoon the Bank’s monetary policy committee (MPC) voted 5-4 – the narrowest possible margin – to leave the cost of borrowing unchanged. The news means there is a greater chance that mortgage rates have peaked, although experts have warned for people not to get ahead of themselves.
Until yesterday, industry specialists believed the Bank would up interest rates for the 15th time as they suspected inflation rates were going to increase. However ONS figures showed yesterday inflation rates dropped to 6.7% in August.
The news ends the longest period of ‘tightening’ – a lift in the cost of borrowing – in recent Bank of England history – as the MPC raised rates 14 times since December 2021.
Commenting on the Bank’s decision, Tom Hopkins, portfolio manager at BRI Wealth Management, said: ‘The Bank of England have decided to hold interest rates at 5.25%. This marks the first pause after 14 consecutive rate hikes over the last 18 months.
‘The UK’s annual inflation rate slowed to 6.7% last month amid weaker growth in food prices and monthly falls in the cost of hotels and air travel. Today’s decision to pause follows the same path as the Federal reserve yesterday, however it’s too early to rule out any further rate hikes this year.’
Against this backdrop, four members of the Bank’s group voted to raise the cost of borrowing, which signals that future hikes are not to be ruled out completely.
In addition, the Bank also voted to continue its programme of reversing quantitative easing – the scheme that provides money to buy government bonds and pump cash into the economy.
‘After the unexpected and encouraging decreases in CPI inflation witnessed yesterday, an interest rate hike has also been paused providing some reassurances for businesses and consumers alike,’ said Douglas Grant, CEO of Manx Financial Group PLC. ‘With small and medium enterprises (SMEs) representing approximately half of all private sector turnover in the UK, it is imperative that we devise innovative measures to safeguard their viability. SMEs should continually look to assess their existing lending structures and proactively prepare for the challenges ahead.’
Image: Francais a Londres
Interest rates on knife-edge following a surprise drop in inflation
