Bank of England holds base rate at 5.25% for second consecutive month

The pause in rate hikes continues as inflation goes unchanged in September.

The Bank of England’s Monetary Policy Committee (MPC) voted 6 to 3 in favour of maintaining the base rate at 5.25% for the second consecutive month.

The decision follows UK inflation holding at 6.7% in the year to September, according to the Office for National Statistics (ONS). This remains well above the Bank of England's 2% target.

Caption: Interest rates remain unchanged at 5.25% following decision from Bank of England's Monetary Policy Committee. Chart created with flourish.studio

Elsewhere, only yesterday the US central bank - the Federal Reserve - chose to maintain the target range for the federal fund rate at 5.25% to 5.50% after inflation went unchanged at 3.7% in the year to September.

Nevertheless, Jerome Powell, Chair of the Federal Reserve, said there is still “a long way to go” in the process of getting inflation sustainably down.

Meanwhile, the Governing Council of the European Central Bank (ECB) held its three key interest rates at 4.00%, 4.50% and 4.75% last week. This is the first time these rates haven’t seen an increase since summer 2022.

On the decision, Christine Lagarde, President of the ECB, said although “inflation is still expected to stay too high for too long”, it dropped ‘markedly’ to 4.3% in September, down from 5.2% the previous month.

While it’s as yet unknown whether there will be further base rate fluctuation before the year is over, Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, shared some potentially positive news.

“Borrowers may well be cautious or even reluctant to apply for a new fixed rate mortgage until fixed rates fall further, so seeking advice to explore all the options available to them is essential,” Springall began.

“The good news is that there are expectations for further falls in swap rates, which could prompt fixed rates to drop. Favourable market swap rates have already been cited by some big lenders as an opportunity to cut fixed rates in their range,” she added.

This is echoed by Oliver Dack, Spokesperson for Mortgage Advice Bureau.

"SWAP rates have recently been coming down so we have been giving borrowers better news on recent fixed rates," he said.

However, it's important to keep in mind there are other factors to consider, such as product fees and incentives, when choosing a mortgage. Seeking independent advice from a mortgage broker could help to navigate options.

As for savers, Springall offered the reminder that some of the best returns on the market are offered by challenger banks or building societies. “Considering the more unfamiliar brands is always wise to compare rates if they have the same depositor protection in place as a big high street bank,” she said.