Bank of England is ‘walking a tightrope’ by holding bank rate at 5.25%

Three members preferred to increase the bank rate by 0.25 percentage points, to 5.5%.

In the MPC’s November Monetary Policy Report projections, conditioned on a market-implied path for Bank Rate that remained around 5.25% until 2024 Q3 and then declined gradually to 4¼% by the end of 2026.

GDP was expected to be broadly flat in the first half of the forecast period, in part reflecting relatively weak potential supply, and an increasing degree of economic slack was expected to emerge from the start of next year.

Industry reacts to Bank of England maintaining base rate at 5.25%

Paresh Raja, CEO at Market Financial Solutions:

“It’s almost two years to the day since the Bank of England began its rate hiking cycle, but today’s decision to maintain rates for a third consecutive time is as sure an indicator as any that it has now peaked.

“It remains very hard to predict where the base rate will sit in six or 12 months’ time.

“For now, though, the property market can only benefit from it holding flat – buyers can adapt to the higher rate environment, with the stability allowing them to properly assess how much they can or want to borrow.

Jatin Ondhia, CEO at Shojin:

“The Bank of England is walking a tightrope.

“Understandably, it is unwilling to loosen its grip on inflation by dropping rates any time soon.

“But it also has to be careful not to inflict excessive damage on the UK’s contracting economy.

“It’s an unenvious task, but we should welcome the fact that the base rate is likely to hold at 5.25% in the short-to-medium-term — it means people can finally make financial plans with a degree of certainty, and the timing couldn’t be better.”

Tomer Aboody, director at property lender MT Finance:

“Another meeting where rates have been held will prove further that the government and Bank of England are on track in their inflation prediction. 

“It will also install further confidence within the market and boost hopes that base rate has peaked, with the possibility of a reduction on the way by the middle of 2024.”

Neil Rudge, head of enterprise at Shawbrook:

“The Bank of England's decision to maintain the base rate for the third consecutive time hints at a potential plateau in interest rate increases.

“This will bring relief to business owners in the UK who have potentially been relying on available cash deposits, rather than taking on new finance.

Mark Harris, chief executive of mortgage broker SPF Private Clients:

“It comes as no surprise that the Bank of England has held interest rates at 5.25% per cent for the third consecutive meeting.

“Weak GDP figures has increased the possibility that the next move in rates will be downwards and that could come sooner than many predicted.

“We expect base rate to be heading towards 4% by the end of 2024, assuming inflation also continues to move towards its 2% target.

“This would necessitate around three or four interest rate cuts next year — which would be welcome news for borrowers who are struggling with affordability.”

Adam Oldfield, chief revenue officer at Phoebus Software: 

"After a year of ups and downs it is good to end the year on a more stable footing.

“Although rates aren't yet going down, the fact that they are not going up is a relief. 

“Borrowers and potential purchasers can't have failed to notice that overall mortgage rates are coming down.”