- Monetary Policy Committee (MPC) holds rates at 5.25%
- Six members voted to hold, with three proposing a further hike
- Why it’s time for savers to get moving to lock in the best rates
Laura Suter, head of personal finance at AJ Bell, comments on the Bank of England’s decision to hold interest rates:
“The nation will be breathing a sigh of relief that the Bank of England has followed expectations and held interest rates for the second month in a row – hopefully ending almost two years of consistent hikes. Maintaining rates at 5.25% will raise hopes that we have finally hit peak interest rates – and that the only route from here is down.
“But anyone hoping for a drop in rates as steep and swift as the climb up will be disappointed. Markets are pricing in no cuts until Autumn next year. It means that rather than a traditional ‘mountain’ shaped rise and fall in rates we’re expecting a table-top mountain, where rates tick along at the same level for almost a year before a slower drop back down. The Bank itself says the market expects rates to only hit 4.25% by the end of 2026 – showing how glacial the path down could be. With risks like the conflict in the Middle East and a potential spike in oil prices, not to mention the potential for a surprise in inflation numbers or another economic data point, we can’t entirely rule out any further rate hikes. And the Bank has certainly not ruled it out, if it sees ‘more persistent inflationary pressures’. The fact that a third of the MPC voted for a rate hike today shows there is still appetite among the committee to tighten monetary policy further.
“Peak rates mean that it’s time for savers to get moving if they haven’t yet locked in a fixed rate deal. With no further rises expected, this is probably as good as it gets for savers – so anyone who has been waiting for rates to improve should start shopping around now. Equally, peak interest rates might spark more people who are re-mortgaging to move to a tracker rate. We’ve already seen a big increase in the number of homeowners opting for trackers, rising from 6% of all new mortgages at the end of last year to 16% in the second quarter of this year. But anyone moving to a tracker needs to be sure that their finances won’t be derailed if another rate hike does materialise.”
