The Bank of England voted unanimously to leave the base rate unchanged at 0.75% in March, with political and economic uncertainty making it impossible to know which way rates will move next.
There was limited pressure on the committee to raise rates following Wednesday’s inflation figures, which showed the cost of living in February climbed by 0.1 of a percentage point to 1.9%, still lower than the government’s 2% target.
The Bank said that since its last meeting recent economic data had been “mixed”, but that this may provide less of a signal than usual about the outlook for growth over the medium-term.
Brexit uncertainty weighing heavy
The Bank is adopting a ‘wait and see’ approach whilst wrangling over Brexit continues. It is still unclear whether a deal will be reached, or when our departure from the EU will take place.
“The economic outlook will continue to depend significantly on the nature and timing of EU withdrawal, in particular: the new trading arrangements between the European Union and the United Kingdom; whether the transition to them is abrupt or smooth; and how households, businesses and financial markets respond,” the Bank of England’s statement said.
“The appropriate path of monetary policy will depend on the balance of these effects on demand, supply and the exchange rate. The monetary policy response to Brexit, whatever form it takes, will not be automatic and could be in either direction.”
Be prepared for rate changes
Homeowners with variable rate mortgages won’t see any change in their monthly payments following the Bank’s decision to hold rates at 0.75%.
However, no-one knows what the future holds, so it makes sense to think about how you would cope with any rise in payments if rates were to increase in future.
If you’d struggle to cope with steeper costs and aren’t locked into your existing deal, you may want to consider locking into a fixed rate mortgage sooner rather than later, so that your payments remain constant even if interest rates don’t.
Interest rates kept on hold amidst Brexit uncertainty