Mortgage exemption for millions because BoE keeps interest rates for the FOURTH time
MILLIONS of households will breathe a sigh of relief after the Bank of England left interest rates unchanged again today.
The Bank's Monetary Policy Committee (MPC) decision-makers have now kept interest rates at 5.25% for four consecutive meetings.
The MPC voted by a majority of six to three to maintain interest rates at current levels.
Andrew Bailey, the Bank's governor, said there had been “good news” on inflation in recent months, but the committee needed to see more evidence that inflation “will fall all the way to the 2% target and stay there before she can achieve that. lower interest rates.
While the lack of a rate cut could hit mortgage holders more severely, new inflation forecasts from the Bank could ease households struggling with the cost of living crisis.
According to the latest Monetary Policy Report, inflation will fall to 2% between April and June this year, about 18 months earlier than previous forecasts.
However, it will only temporarily remain at the target level before rising in the second half of the year and could rise to 2.8% in the first three months of 2025.
Andrew Bailey has said he and his colleagues need to “see more evidence” that inflation will remain around 2% before cutting rates.
“Today we decided to keep the interest rate at 5.25%. We have had good news on inflation in recent months,” he said.
'It has fallen considerably, from 10% a year ago to 4%.
“But we need to see more evidence that inflation will fall all the way to the 2% target and stay there before we can cut rates.”
Energy prices are expected to be a key driver of inflation levels throughout the year.
The Bank will also keep a close eye on the economy as a whole, as high interest rates can often slow economic growth.
The British economy is expected to have performed worse than previously forecast by 2023, the Bank of England said.
Gross domestic product (GDP) is expected to have risen by 0.25% over the year, less than the 0.5% the Bank forecast in November.
But while the country has lowered its expectations for last year, growth is now expected to be higher this year, at 0.25% from 0%.
GDP will also grow faster than previously expected in 2025 – by 0.75% compared to 0.25% – and in 2026 – by 1% instead of 0.75% – the Bank's economists said.
Major banks use the base rate to determine the rates they offer customers on items such as loans, savings and mortgages.
Higher interest rates are bad news for households, because they make mortgage costs more expensive.
But freezing mortgage rates is good news for homeowners facing crippling repayments.
What it means for your money
Below we will tell you more about what the fixed interest rate means for your money.
Mortgages
When interest rates rise, it usually means that your mortgage costs will increase, depending on the type you have.
Those with fixed rates are usually safe for now until they remortgage.
But other mortgages, such as a tracker or standard variable rate (SVR) mortgage, can also be directly affected.
Homeowners with an adjustable-rate mortgage may not see their payments increase immediately, but they are likely to increase shortly after interest rates increase.
But the exact amount depends on your loan and your loan-to-value.
However, because the BoE has chosen to freeze current interest rates, your lender may choose to do nothing at all.
Your bank should warn you of any increase in your rate before it goes up.
Here you will find more information about how to find the best mortgage rate.
Credit card and loan rates
Here too, the cost of borrowing through loans, credit cards and overdrafts may increase if the base interest rate is increased, because banks are likely to pass on the increased interest rate.
Certain loans that you already have, such as a personal loan or car financing, usually remain the same because you have already agreed on the rate.
But rates on future loans may be higher, and lenders may increase rates on credit cards and overdrafts, although they must let you know in advance.
But for now, nothing is likely to change because of the interest rate cut.
However, you can still cancel a credit card if you wish. You then have 60 days to pay off the outstanding balance.
Savings rates
Savers are the main group that has benefited from the successive interest rate increases.
Banks tend to enter the fray by offering market-leading interest rates.
Although banks usually act much slower than when they pass on higher interest rates on loans.
Since interest rates do not change, banks will likely benefit from this and keep their interest rates the same.
Anyone currently getting a low rate on easy-to-access savings might find it worth shopping around for a better rate and moving their money.