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The Bank of England kept interest rates unchanged at 5.0%, which was expected but may still come as a disappointment to some mortgage holders.
Eight of the nine members of the Monetary Policy Committee chose to keep interest rates unchanged, while Swati Dhingra, an outside member of the Monetary Policy Committee, opted to cut rates.
The US Federal Reserve cut interest rates by 0.5% yesterday, the first US interest rate cut since the COVID-19 pandemic, giving it more of a catch-up feel.
CPI inflation stood at 2.2% in August, close to the 2% target. If this stability continues, at least one rate cut is likely in the coming months. The next MPC meeting is on November 7.
Sam Richardson, deputy editor of Which? Money, said: “The banks’ decision to keep interest rates on hold is not a surprise, but it will still be disappointing for homeowners approaching the end of their fixed-rate contracts and hoping for a market drop.”
“Mortgage rates have been gradually declining, with the market-leading two-year fixed rate dropping below 4% for the first time in two years earlier this week. There’s been a lot of talk about rates below 4%, but they’re only available to those with a large down payment.
“Many households are still struggling and this decision means that interest rates are unlikely to rise beyond current levels, but the pace of rate cuts is likely to slow going forward.”
“As always, the most suitable mortgage option will depend on an applicant’s individual circumstances, so if you’re unsure which plan is best for you, consider speaking to a mortgage broker.”
Jason Tebb, managing director at OnTheMarket, said: “As widely expected, the Bank of England decided to keep interest rates unchanged at 5%.”
“Inflation appears to be contained at 2.2 per cent, but there are concerns that rising energy prices could push inflation higher into the autumn.”
“While the market is expecting further rate cuts by the end of the year, banks are remaining cautious for now, especially now that the Federal Reserve has also cut rates boldly.”
“While there has been no cut in the base rate this time, the hold signals a welcome, more stable outlook after the pain of successive rate hikes, allowing borrowers to plan for the future with more confidence.”
“Meanwhile, softening mortgage rates are helping to unlock some pent-up demand as buyers and sellers who have been waiting for interest rate movements finally take action.”
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