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Bank of England to keep interest rates on hold

The Bank of England is likely to hold interest rates at 5.25% next week, according to economists.

The next base rate decision is set to be made on Thursday.

While the Bank has looked to raise interest rates to curb inflation in the past 12 months, doing so further would likely to have a worsening effect on mortgage holders, who are already struggling to cope with escalating rates.

Susannah Streeter, head of money and markets, Hargreaves Lansdown, said: “The ‘wait and see’ chorus appears to have been growing louder within the Monetary Policy Committee and given that the latest jobs data suggests a fresh cooling off in the labour market, policymakers are likely to keep rates on hold again, and wait for the previous rate hikes to take effect more fully.

“As more homeowners are forced to take on big increases in monthly mortgage costs as their deals come to an end, the effect of financial fragility is likely to show up in more frugal spending patterns and more uncertainty about jobs moves and reticence when it comes to pay demands.”

Sarah Coles, head of personal finance, Hargreaves Lansdown, said: “Mortgage rates have fallen slightly from a recent peak for the average 2-year rate of 6.85% at the start of August to 6.34%. However, they’re still a long way above the levels we saw in the spring – let alone the sub 2% rates so many people on fixed rate mortgages have come to rely on.

“The expectation that rates will hold for a considerable period may see mortgage rates come down slightly further. There are still some people in the market who think there could be another rise in the works, so if nothing materialises, this expectation will gradually filter out of prices, and rates come down a little. However, there’s not much of a rise priced in, so we won’t see them fall particularly far.”

James Smith at ING told Reuters: “The Bank kept rates on hold in September and there hasn’t really been much data since then to change that position. And the data we have had – wages, inflation – wasn’t that different to what everybody expected,”
“The bigger picture is the impact of previous hikes is still coming through.”