The Bank of England has confirmed that interest rates are to be held at 5%.

At its latest meeting, the central bank’s Monetary Policy Committee (MPC) voted by a majority of eight to one to maintain the base rate at 5%. One member voted for a 0.25 percentage point cut, to 4.75%.

The decision follows yesterday’s announcement by the Office for National Statistics (ONS) that inflation remained at 2.2% in the year to August, a level still 0.2% up on the BoE’s 2% target.

In the BoE’s latest monetary report released today, the Bank said that policy decisions have been guided by a need to “squeeze persistent inflationary pressures out of the system” in order to return inflation to the 2% target “in a timely manner and on a lasting basis”.

Last month, the central bank cut its base rate for the first time since the onset of the COVID pandemic in March 2020, having previously held rates at 5.25% at seven successive MPC meetings.

Prior to that, the BoE had increased its base rate from a record low of 0.1% during the pandemic at 14 successive MPC meetings between December 2021 and August 2023, which took interest rates to a peak of 5.25%.

While this cycle of hiking helped to slow the rate of inflation, which peaked at 11.1% in October 2022, it also led to large increases in mortgage payments.

“While the base rate has stayed the same today, many are predicting two more cuts before the end of year, and activity in the mortgage market is starting to ramp up as a result,” head of business development at Saffron for Intermediaries, Tony Hall, commented.

“While the October Budget will help provide more clarity on longer-term expectations for the market, it is safe to say confidence in the market is increasing, and a busy Autumn period will be supported by falling mortgage rates.”

CEO of Octane Capital, Jonathan Samuels, added: “The mortgage sector has been responding well to the market certainty that followed the BoE’s initial decision to hold rates at 5.25% and this market sentiment has only improved further following the base rate reduction seen at the start of last month.

“As a result, we’re not only seeing the rates offered on many products reducing, but the range of products available is also growing, with this greater level of choice helping more buyers to enter the market.

“Today’s decision to hold interest rates at 5% is unlikely to dent this growing market positivity and we expect more buyers to be tempted back into the fold.”

---