Bank of England decided to keep interest rates unchanged at 5.25%

“UK inflation remains the highest among the world’s rich economies, and while recent hikes may have curbed this regrettable trend, the impact on savers is considerable. Higher interest rates are intended to do more than combat inflation – they are supposed to protect Britons’ savings from losing too much of their real-term value. However, failure on the part of high-street banks to pass higher rates to consumers has left Britons worse off than they might have been. 

“While the big banks are gradually catching up to the higher rates set by the central bank, the onus remains on savers to be savvy and keep their eyes peeled for the best returns if they want to protect their nest eggs. Although rates have held firm this week, Britons must act quickly to protect their savings before recent hikes are reversed and the high street swiftly follows suit.” 

Arjan Verbeek, CEO and Co-Founder of Perenna comments: “Stability will be a welcome sight for many, but it doesn’t help reduce the uncertainty for homeowners who still have to deal with an incredibly volatile market. Neither does it improve housing affordability. Unless the standard variable rate reduces, which is the reference for stress testing, homebuyers will continue to struggle to get onto the housing ladder.

“Long-term fixed rate mortgages are the only real way to fix these systemic issues, and adoption of these models will create a fairly priced and affordable housing market. As the rate is fixed, there is no stress test, meaning homebuyers could borrow more on their income responsibly. The UK mortgage market must recognise the success of these models in Europe and the US in supporting homebuyers. Lenders, regulators and the government must act to help shift to provide a more secure and stable reality for homeowners.”

Joe Pepper, CEO PEXA UK said: “The decision to maintain the base rate will come as a welcome respite to borrowers who were worried about further rises on their mortgage repayments. We’ll see fewer borrowers having to scramble to lock in the lates deals, especially since the competitive repricing from lenders in recent months in an attempt to drive activity.

“While it’s possible that we have seen rates peak, the record-breaking interest rate spiral is still having an impact on the cost-of-living. Homeowners will still be looking to manage their finances closely.

“Despite the decision to maintain the interest rate, many borrowers who took out a two-year fixed rate mortgage during the Stamp Duty holiday in 2021 will still see a sharp increase in their renewal rate, Many will likely be hoping we are indeed at the peak of the cycle and lenders will continue to offer more competitive rates. At a time when speedy processing could be the difference in securing the most affordable deal, technological innovation will be needed. Digital remortgages are going to be key in transforming the property market, helping build capacity, reducing friction and providing customers with more choice in a market where consumer outcomes are at the forefront for the regulator.”

Paresh Raja, CEO of Market Financial Solutions, said: “With the Bank of England holding the base rate and house prices growing unexpectedly yesterday, there’s room for positivity to return to the property and lending markets. Following a challenging 18 months, these reasons for optimism should translate into more favourable products and rates for property buyers in the coming weeks and months.”

“Nevertheless, lenders cannot take their foot off the break when it comes to supporting brokers and borrowers who will still be feeling the harsh effects of the new higher rates environment. To help the market return to a more buoyant state, therefore, lenders must recommit to taking a proactive approach to lending – providing clarity and certainty to borrowers wherever possible, allowing them to enter the property market with confidence.”

Alastair Douglas, CEO of TotallyMoney comments:“Today’s decision to hold the base rate was widely-expected — and the days of ultra-low rates are unlikely to return, at least not in the near future. It’s good news for savers, but not so brilliant for borrowers.

“Some homeowners haven’t yet felt the brunt of the previous hikes, and will be in for a shock when their fixed rate deal comes to an end. Mortgage defaults are already rising at the fastest pace since 2009, and if you’re struggling to keep up with payments, then get in touch with your lender as soon as possible. The Financial Conduct Authority has ordered banks to put their customers’ needs first, and this means you could move to reduced monthly payments, or extend the term of your deal.

“Remember that this won’t negatively impact your credit rating. However, missed payments can — and they could stay on your credit file for up to six years. If these persist, you might end up in mortgage arrears, leading to court action and even repossession.”

Andrew Hagger, Personal Finance Expert, Moneycomms.co.uk adds:“The monthly hikes in base rate may have stalled, but the cost of living squeeze hasn’t gone away — increased energy costs, higher prices at the pumps and soaring mortgage rates mean there’s little respite for the household budget at the moment. 

“Many people will have to tighten their belts this Christmas, but will be hoping that 2024 is less harsh on their bank balance — however any rate reductions will be slow and steady, so it’s likely to be another tough year ahead.”

 Adam Zoucha, MD EMEA of FloQast, comments: “Interest rates holding steady at 5.25% will come as a relief, as a further increase would have been more difficult for organisations to manage. However, businesses still need to plan for how to cope with high interest rates for the long-term, as all the indicators point to rates holding through to September 2024.  

“This hold on fiscal tightening continues to put us on a similar footing to the height of the financial crisis, and has increased business risk and the number of liquidations. Additionally, insolvency levels this year are now on track to meet the levels of 2009.    

“As ever, organisations will need to be fiscally shipshape. Accurate finances and efficient data will be the bedrock of business resilience and the springboard for recovery once confidence returns.”  

Mike Randall, CEO of Simply Asset Finance says, “A steadying of interest rates will undoubtably relieve some pressure for small businesses, but there are still fundamental problems to be solved if they are to thrive in the coming year.”

“These are firms that have remained unwaveringly resilient in the past few years, facing stubborn inflation, some of the highest interest rates on record, persistently high energy costs and ongoing supply chain issues. Yet support available to small firms – which represent 99% of UK business – has still remained limited, and in some cases has been cut back in recent months.

“Recently announced government commitments, such as the Prompt Payment & Cash Flow Review, are certainly a step in the right direction, but the job is far from complete and all eyes will be on the chancellor’s Autumn statement next month. Despite the odds often being stacked against them, we are continuing to see SMEs investing in their growth as they know business must go on. But to ensure they can effectively pursue that journey to growth, it will be the responsibility of the financial industry and the government alike to help clear the path of any obstacles, and  give business leaders the confidence they need to feel empowered.”

Michael McGowan, Managing Director, Foreign Exchange, Bibby Financial Services: “After September marked the first pause in a brutally long run of rate rises, it’s come as no surprise that the Bank of England held the interest rate steady again today – especially after this week’s fall in food price inflation. Businesses may dare to hope the summit has been reached and hikes are at an end. 

Yet a rate of 5.25 per cent is no walk in the park for businesses – and SMEs, who rely most on external finance, will be feeling the pinch hardest. What’s more, for the 53% of UK SMEs that import and/or export across borders, the rate pause has already sent the pound tumbling against the dollar and the euro, which represents a potential a blow to profitability.  

It’s critical then that SMEs –– the backbone of the UK economy – closely monitor their foreign currency needs while fluctuations persist, to mitigate the risks of a weaker pound and current volatility.”

Susannah Streeter, head of money and markets, Hargreaves Lansdown:“The Bank of England is singing the same tune as the Federal Reserve and has stayed firmly in the ‘wait and see’ chorus, cautious that the full impact of interest rates hikes has yet to be felt. The decision to press pause, and hold rates at 5.25%, was widely expected, so caused no major market movements initially. The FTSE 100 has remained deep in positive territory, while the pound shifted slightly higher against the dollar, building on gains made since yesterday, though sterling is still largely hovering around lows not seen since March.

Although this wasn’t a unanimous vote, there is a growing strength of feeling that previous rate hikes need more time to feed through. There are deepening concerns about the faltering economy as the high borrowing costs batter financial resilience and policymakers paint a stark picture of a stagnation scenario lasting until 2025. The minutes highlight that UK GDP is expected to have been flat in the third quarter, weaker than initial estimates. The economy only just eked out growth in August and there has been a surge in company insolvencies.

Although inflation was still more than three times the bank’s target, it’s expected to have taken another big step down in October, and private sector wage growth is also showing signs of easing. It’s far from surprising that the majority of policymakers want the economy to take a breather from this painful cycle of rate hikes. The potential for oil prices to shoot higher remains a worry, but not a major concern right now. So, barring further shocks, it looks highly likely we have hit the peak in the cycle, but cuts are still not expected until the second half of next year.”

Managing Director of House Buyer Bureau, Chris Hodgkinson, commented:

“We’re seeing clear signs that the property market is now starting to stabilise, although transaction levels and sold prices remain down on the historic highs seen in recent years, as the higher cost of borrowing and wider cost of living continue to restrict home buyers.

So today’s decision to hold interest rates should be viewed as a welcome positive for the property market and should allow buyers and sellers alike to act with a greater degree of confidence going into 2024.”

CEO of Octane Capital, Jonathan Samuels, commented:

“The Bank of England seems to have tamed inflation to a degree, albeit it’s taken considerably longer than it should and remains some way off the two percent target.

Given that there’s still a good bit of work to be done, today’s decision to hold interest rates won’t come as a surprise and we can expect the base rate to remain around five percent for some time yet.

Of course, this ‘new normal’ has historically been the norm anyway and, as home buyers and owners adjust to this latest benchmark of borrowing affordability, we should see the property market stabilise and return to business as usual come 2024.”

CEO of RIFT, Bradley Post, commented:

“Households across the nation will be breathing a sign of relief with interest rates remaining static in the run up to Christmas. This will, at least, provide some stability with respect to the cost of borrowing, particularly during a period where our household spend is far higher than usual.

Of course, while positive, this still doesn’t detract from the fact that the cost of living remains substantially high and, as a result, a great deal of people will be facing another Christmas of cutbacks in order to make ends meet.”

Jason Ferrando, CEO of easyMoney says:

“It would appear that the Bank of England is starting to get a handle on inflation but a freeze on rates was to be expected given that we’re not yet out of the woods.

For the nation’s borrowers, this will do little to ease the financial pressure they are facing with the base rate remaining at its highest in over 15 years.

The silver lining is that for those looking to accumulate a savings pot for future endeavours, returns are favourable, although how favourable depends on where and how you choose to invest your money.”

Nicholas Hyett, Investment Manager at Wealth Club, commented;

“The market had expected the Bank of England to hold rates steady this time round, so there’s no headline surprise from the Monetary Policy Committee.

But the devil is in the detail.

The Bank seems to disagree with the widely held view that the UK economy is creaking badly. While it notes some gloomy data from the most recent PMIs and evidence that labour markets are softening, it does not think the UK is on the edge of a dangerous economic reverse. In fact, three members of the committee voted to raise rates further – clearly suggesting the Bank sees more risk in inflation than in recession.

Having said that there is some good news where inflation is concerned. Inflation is expected to be under 5% in the final quarter of the year. A substantial fall from the most recently reported number and welcome news for a government that made cutting inflation a key policy pledge.

Overall it’s a surprisingly positive set of minutes from the Bank, and certainly doesn’t reflect the gloom you might feel on the streets. The result is a pause in rate hikes, but the commentary doesn’t suggest interest rates will fall quickly from here.”