Bank of England Base Rate – February 2024

The Bank of England has just left the base rate on hold at 5.25%.

In today’s decision, the Bank of England’s choice to keep the base rate unchanged, while cautious, might be a missed opportunity to invigorate the economy and ease the anxiety of mortgage holders across the country. The current financial landscape, fraught with uncertainties, may have benefited from a more assertive action in the form of a rate cut, especially as there is an expectation that inflation will soon fall to its 2 percent target. The Bank says this could be met by April. Holding the rate steady, though seemingly prudent, overlooks the potential stimulus that a cut could offer to both the housing market and wider economic activity, and it is worrying that two members of the Committee voted to increase rates further, in a move that looks increasingly out of touch with the average consumer.

Only one MPC member voted to reduce borrowing costs to 5%. But the Governor says “more evidence” is needed of lower inflation before cutting rates.

Interestingly, this is the first 3-way split by the committee since 2008, which illuminates the differing opinions at the very heart of the Bank.

The Bank also upgraded its economic forecasts but warned of an almost 50-50 chance of a technical recession in late 2023. Whilst we acknowledge the stability this decision brings; we also recognize the potential growth and relief for consumers that could have been spurred by a bolder move.

All eyes are on the next inflation report and the reaction of SWAP rates and therefore mortgage lenders.