The Bank of England has left interest rates unchanged for the sixth consecutive time despite price rises accelerating due to the ongoing Middle East conflict.

Its Monetary Policy Committee (MPC) voted by a majority of six–three to maintain the Bank Rate at 3.75% - three members voted to increase it by 0.25 percentage points, to 4%.

New figures released this week showed the Consumer Prices Index (CPI) measure of inflation had risen to 3.1% in August from 2.9% in July, pushing it to its highest rate in six months. The Bank projects that inflation could reach as high as 4.5% in the second quarter of next year as a direct result of substantially higher energy prices.

Bank of England governor Andrew Bailey (pictured left) says the longer the volatility in energy prices persists, “the bigger the impact it will have on inflation and the more likely it is we will need to raise [the] Bank rate to ensure that inflation falls back to our 2% target”.

Welcome

Many property experts believe the announcement provides a welcome window of stability ahead of the Budget on 28 October and the Bank’s next decision on 5 November, in advance of which the markets are increasingly pricing in the possibility of a rise. However, mortgage rates have been edging up this week ahead of today’s decision, indicating that the market has already stopped pricing in quick cuts.

“While the Bank of England’s decision to hold the base rate offers some relief for buyers and those on variable-rate mortgages, there is growing uncertainty over how long that respite will last,” says Nick Leeming, chairman of Jackson-Stops.

Influence

“The Bank can influence the cost of borrowing, but the government can address the cost of moving. With the Budget approaching, targeted stamp duty reform could help remove one of the barriers preventing people from making the moves they need to make, particularly when the future path for borrowing costs is becoming less certain."

Sarah Thompson, group financial services director at Mortgage Scout (pictured right), says mortgage pricing has already moved in response to swap rates and the wider financial markets, so increasing the base rate would have placed more pressure on households without necessarily tackling inflation that is being driven largely by higher oil and energy costs.

“For anyone due to remortgage, the message is more immediate - now is the time to review the options and secure a rate. If a better deal becomes available before completion, it may still be possible to switch, but waiting could mean losing access to a rate that is available today,” adds Thompson.

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