The Monetary Policy Committee (MPC) has voted to hold interest rates at 3.75% at today’s meeting – a move which was widely expected. However, the vote was much closer than many anticipated after inflation rose to 3.4% in the year to December.
Following the cut in base rate at the MPC meeting in December, this time around members voted by a majority of five to four in favour of a hold. Four members voted for a 0.25 percentage point reduction in bank rate to 3.5% amid expectations that inflation will fall back to around the 2% target from April.
Although lenders kicked off the year with a round of rate reductions, in recent days mortgage rates have been creeping back upwards again.
Commenting on the base-rate decision, Mark Harris, chief executive of SPF Private Clients, says: “It felt as though there was a slim chance that the Bank of England would cut interest rates this month amid ongoing concerns over inflation, but the vote was much closer than many anticipated.
“While this hold is disappointing for borrowers with variable or tracker-rate mortgages who would have seen a further drop in their monthly payments if there was a cut, those on existing fixed-rate mortgages won’t see any change. Those who are coming up to remortgage will have noted that some lenders have increased the pricing on new fixed-rate mortgages in recent days, the pricing of which is heavily influenced by swap rates. This increase in swap rates reflects market expectations of a shallower path of rate cuts than was previously thought, although after today’s vote that outlook could shift again.
“Given this uncertainty, those who are due to take out a new deal this year or remortgage should consider securing a product now. Speak to a whole-of-market broker such as SPF Private Clients and get a rate booked in for peace of mind. Then, when you come to take out the mortgage, if rates have fallen again, you should be able to move onto a cheaper rate at that time. However, if they have risen, you will be pleased you secured a rate when you did.”
