The Monetary Policy Committee (MPC) has voted to hold base rate at 3.75% for the sixth consecutive meeting.
With the US Federal Reserve and European Central Bank both raising their benchmark rates, the pressure was on Governor Andrew Bailey and the MPC to follow suit, but they resisted.
However, the markets are pricing in up to four interest rate rises. Inflationary concerns are growing with the prospect of higher energy prices to come, and worries for the labour market and wider economy persist.
The number of MPC members who are leaning towards a rate increase remains consistent with the 6-3 voting split at the July meeting. Once again, three members favoured a quarter-point increase to 4%. However, the MPC said ’the risks to the inflation outlook are tilted to the upside, and more so than at the time of the July Monetary Policy Report, although there remains scope for the outlook to change materially as events in the Middle East unfold’.
Commenting on the decision, Mark Harris said:
“Prevailing caution feels the correct response for now, with a steady hand on the tiller rather than a knee-jerk reaction to raising rates. This is vital for overall market stability and confidence.
“Despite the rate hold, borrowers still have to contend with an upwards trajectory in mortgage pricing, with several big lenders increasing rates on their two- and five-year fixes. Mortgages are growing more expensive and affordability concerns remain, although swap rates have eased today after rising in recent days.
“Independent advice from a broker such as SPF Private Clients is crucial. Mortgage rates are usually valid for up to six months, so securing one now with the option of reviewing it before completion to see whether there is a better product available at that time, would be a prudent approach. Get in touch with SPF Private Clients to find out what options are available to you.”
