Bank of England Base Rate Announcement

The Bank of England’s Monetary Policy Committee, (MPC), have announced that there will be no further change to Bank Base Rate this month, opting to hold the rate at the 5% level.

The MPC voted by a majority of 8–1 to maintain the Bank Base Rate at 5%, with one dissenting member voting to reduce the Bank Base Rate by a further 0.25%.

After the Federal Reserve in the US took a more aggressive stance and cut its benchmark interest rate for the first time in four years by 0.5% on Wednesday, signalling that more reductions would follow, some held out a faint hope that the Bank of England would continue with its own reductions.

The reality, however, was that a further cut this time around was never really on the cards, as this week’s inflation figures acted to temper expectations from those over-excited that Bank of England Base cuts would come thick and fast.

It was always likely that nothing more would happen until at least November as core and services inflation continued to stay stubbornly sticky. The market expectation is still for a further 0.25% cut in November with another following shortly after.

Andrew Montlake, MD of Coreco commented, “The Bank of England has acted true to form, opting for caution rather than a more assertive approach many had hoped for.

“With core and services inflation proving stubbornly sticky, and a budget waiting anxiously in the wings, opting to hold fire until November could be seen as a sensible approach.

“Markets have, however, priced in a further cut this year, and mortgage lenders are now well entrenched in a competitive rate war that may now see them dig in rather than foray too far further forward just yet.

“Lenders will be hoping they can finish the year strongly, in what has been a disappointing lending market this year, whilst borrowers will be frustrated that their monthly costs will not be reducing too much further.

“The question now is whether those that decide to wait for further reductions before buying will find any potential saving more than wiped out by increasing house prices as demand continues to return to the housing market.”