Mortgage Holders Left in Limbo as Interest Rates Remain Unchanged

The Bank of England’s decision to keep interest rates at 5.25% has left mortgage holders wondering when they will see some relief. Despite inflation returning to the 2% target last month, the Bank’s Monetary Policy Committee (MPC) has chosen to hold off on cutting interest rates.

The Bank of England’s decision has left mortgage holders in limbo.

Chancellor Rishi Sunak was quick to declare that the economy has “turned the corner” after a long stretch of above-target inflation. However, experts are cautioning that a rate cut this summer is less likely until the majority of the MPC feel certain that inflation is under control.

The rate of services inflation, which looks only at service-related categories like hospitality and culture, has remained more stubborn than expected. This key gauge for policymakers has stayed at 5.7%, 0.4 percentage points above the Bank’s forecast from the May Monetary Policy Report.

“Indeed at 5.7%, [services inflation] is now 0.4 percentage points above the Bank’s forecast from the May Monetary Policy Report.” - James Smith, developed economist for ING

Financial markets have reduced bets of a rate cut happening in August, with some economists suggesting it could come as late as September. The MPC may also take into account the latest gross domestic product (GDP) figures, which showed that the UK economy recorded no growth in April, but grew 0.7% across the three months to April.

The UK economy’s growth has been slow, but steady.

The wait for a rate cut has left mortgage holders in a state of uncertainty. With no meeting in July, all eyes are now firmly on the August MPC meeting for our first potential cut to rates.

“It’s highly likely the Bank will want to wait to see the outcome of the election and the final economic plans before making that first cut.” - Laura Suter, director of personal finance at AJ Bell

As the economy continues to navigate the complexities of inflation and interest rates, one thing is clear: mortgage holders will have to wait a little longer for some relief.

Mortgage holders will have to wait a little longer for some relief.