The Bank of England’s Monetary Policy Committee (MPC) has voted to hold the base rate at 3.75%, signalling encouraging news for borrowers.

While the rate has remained unchanged for about six months, the move was widely predicted, particularly as the latest Office for National Statistics figures showed that the annual rate of inflation stayed at 2.8% in May. The rate remains above target but has not risen as high as many had feared given the upheaval caused to global economies.

At its last meeting in April, the MPC signalled that interest rates could rise this year as it attempted to curb inflation following a significant energy price shock from the war in the Middle East. However, despite the initial peace deal, the fallout could still affect the UK over the coming months, and if inflation rises, there could be a base rate hike later in the year, according to Moneyfacts.

Rates

It reports that mortgage lenders hiked rates in the weeks following the outbreak of conflict but, after peaking in April, fixed mortgage rates have since declined - although they remain higher than at the start of March.

Matt Smith, Rightmove’s mortgage expert says the decision to hold the base rate will give some welcome short-term certainty to movers, although the outlook remains sensitive to global events. “There is now more limited pressure for mortgage rates to increase, and we may see lenders continue to gradually reduce rates in the coming weeks if this stability continues, with the average two-year fixed rate currently just above 5%,” says Smith.

Uncertain

Nick Leeming, chairman of Jackson-Stops, agrees that many buyers and homeowners who have spent recent months navigating an increasingly uncertain economic landscape will welcome the announcement.

“While borrowing costs remain significantly higher than the levels seen in recent years, today’s decision provides a degree of consistency at a time when households and businesses continue to face wider economic pressures,” says Leeming. “Against a backdrop of ongoing geopolitical tensions and global market uncertainty, maintaining rates gives buyers greater confidence to plan and make informed decisions without the prospect of immediate further increases.”

The next interest rate decision will be made on 30th July.

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