The Bank of England has held interest rates steady at 4.75% after it was revealed that inflation in November rose to 2.6%, above the central bank’s target.
In its final meeting of the year, the Bank’s rate-setting committee decided against further cuts after recent figures showed an increase in both inflation and wage growth.
The Office for National Statistics revealed inflation had risen to 2.6% from 2.3%, pushed higher by pricier petrol and clothing.
Bank governor Andrew Bailey has previously indicated that while rates will fall further – after two cuts this year – the decline would be gradual.
The Bank will next meet at the beginning of February when it will also give an update of its forecasts for the British economy.
Industry reaction:
Nathan Emerson, CEO of Propertymark, commented: “With many national and international factors continuing to shape the global economy, the Bank of England is understandably taking a cautious path until they can be confident that they are able to safely reduce interest rates back. It has been encouraging to see interest rates reduced across recent months, but the base rate can only be reduced if all factors allow.
“High interest rates can of course affect borrowing for many people, especially those stepping onto the housing ladder, but it’s important there is sensible balance to keep the overall economy secure and workable for all.”
Kevin Shaw, national sales managing director, LRG, commented: “It is disappointing that that Bank of England has decided not to reduce interest rates further today, considering that the UK’s interest rate (at 4.75%) is out of sync with the ECB (at 3%) and other comparative economies globally.
“My view is that the Bank was too slow to increase rates back in 2023 and now runs the risk of being too slow to reduce them. The Bank needs to release the handbrake on the economy as soon as possible.
“A variety of economic indicators – from business confidence and employment rates to consumer spending – suggest that a December drop would have brought some much welcome seasonal cheer.
“I am now hopeful of an interest rate reduction on 6 February.
“In the meantime, however, the start of the year is likely to provide some momentum – whether from those keen to initiate a move as part of their New Year’s resolutions, or in a rush to avoid the Stamp Duty hike in April. Furthermore, despite the holding of interest rates today, mortgage lenders are already competing on rates.
“I remain optimistic of a rush of activity in January, and a lowering of interest rates in February which will keep the momentum going into the Spring market.”
Matt Smith, Rightmove’s mortgage commentator, said: “In a rollercoaster year for the mortgage market, we end the year with a hold in the Bank Rate at 4.75%.
“While not the early Christmas present that many would have wanted, it was widely anticipated, and must be considered against a backdrop of inflation being at the top end of forecasts, and wages have increased at a higher rate than expected.
“We don’t expect any reductions in mortgage rates over the next few weeks, but as we progress into 2025, lenders are likely to look at ways to take advantage of increased demand as the busier home-buying season starts. As we move towards the end of the Stamp Duty reduction, lenders are also likely to look at reducing rates wherever possible
“Next year, three Bank Rate cuts are currently planned rather than the four anticipated just a few weeks ago, highlighting how quickly things can change in the market. We predict average mortgage rates could trickle slowly down towards around 4.0% next year, though this is dependant on the impact of a wide variety of unpredictable factors, including geo-political tensions and inflation.”
