The Bank of England’s Monetary Policy Committee (MPC) voted to keep interest rates on hold at 0.75% in June, with ongoing Brexit uncertainty continuing to hamper economic growth.
The nine-member committee has now voted unanimously to leave rates unchanged for the past year.
The committee said that it expected economic growth to be flat between April and June, down from 0.5% growth in the first three months of the year. It pointed to increasing “downside risks” to growth including intensified global trade tensions and the rising perceived likelihood of a no-deal Brexit.
There was limited pressure on the committee to raise rates this month following inflation figures announced on Wednesday, which showed the cost of living in May fell by 0.1 of a percentage point to 2%, in line with the Bank’s target.
An uncertain future
Although some commentators have suggested that we could see interest rates cut again if there is a no-deal Brexit, earlier this month a Bank of England policymaker warned that rates could move up, especially if inflation overshoots the 2% target in months to come.
In a speech hosted by the Institute of Directors at Southampton’s Solent University, Michael Saunders said that the MPC didn’t necessarily have to keep rates on hold until all Brexit uncertainties are resolved.
“The MPC has already raised rates twice since the Brexit vote,” he said. “We will act again if needed to ensure a sustained return of inflation to target over time.”
It’s impossible for anyone to know which way interest rates will move next, but it makes sense for homeowners on variable rate mortgages to consider carefully the financial impact of a rate rise.
If you’re worried about how you’d cope with steeper monthly payments, and you’re not tied into your current mortgage deal, you may want to consider locking into a fixed rate deal.
The good news is that there are plenty of competitive fixed rate mortgage deals to choose from, with several five-year fixed rates available at well below 2%. Many deals also come with incentives such as free legal work or cashback. You can search for the best mortgage deals here.
Base rate kept on hold in June