The Bank of England (BoE) has confirmed it is keeping its base rate at 5.25%, the third time in a row the central bank has opted to hold interest rates.

At its latest meeting, the Monetary Policy Committee (MPC) at the BoE voted by a majority of six to three in favour of maintaining interest rates at 5.25%, keeping them at their highest level in 15 years.

Three Committee members, however, voted for a 0.25% increase, which would have taken interest rates to 5.5%.

October’s pause in the recent rate hiking cycle ended a run of 14 successive base rate increases, which had seen the BoE gradually raise rates at every meeting since December 2021. Rates were sitting at a historic low of 0.1% this time two years ago.

The flurry of interest rate hikes has formed a large part of the BoE’s efforts to curb the rate of inflation, which fell to 4.6% in October, having come down from 6.7% in the year to September, according to figures published by the Office for National Statistics (ONS).

In the Bank’s latest report, it stated that CPI inflation is expected to “remain near to its current rate around the turn of the year”.

“Given the significant increase in bank rate since the start of this tightening cycle, the current monetary policy stance is restrictive,” the BoE added.

Efforts to curb the rate of inflation with rate hikes have led to large rises in monthly mortgage payments for many homeowners across the UK over the course of 2023.

Chief Revenue Officer at finova, Chris Little, said the BoE’s latest decision keep the base rate at 5.25% will “warm the hearts of many UK homebuyers”.

However, Little also warned: “Even as mortgage rates edge downward following consecutive pauses in the base rate, rates are still high compared to the last 15 years. Affordability will remain a barrier to homeownership for many would-be borrowers and it will be some time before transactions recover to where they were last year.

“As we step towards the new year, some buyers will still be looking to settle down and lenders and brokers should plan to ensure they are meeting borrowers’ shifting financial needs in 2024.”

CEO of Spicerhaart and Just Mortgages, John Phillips, added: “Even with a number of positive indicators, particularly cooling inflation, the Bank is still maintaining its position of ‘higher for longer’ although many are predicting a rate cut early next year.

“Nevertheless, another hold brings continuity and stability and provides an opportunity for lenders to reassess and reprice. It will no doubt add further ammo to the ongoing rate war among lenders – which is great news for borrowers and prospective buyers.

“We mustn’t forget though that this will still be higher that what many clients perceive as ‘normal’, highlighting the real need for brokers to be proactive in educating clients on the realities of today’s market and what it means for them and individual situation.”

---