The Bank of England’s Monetary Policy Committee voted to keep interest rates at 0.75% again in November, although two of the nine members voted in favour of a cut.
It’s the first time there’s been a split in the vote since June 2018, with all decisions since then having been unanimous until this month.
Inflation, or the cost of living, remained at 1.7% in September, lower than the government’s 2% target. There’s less pressure on the Bank to raise rates when inflation is below the target. However, inflation is forecast to rise slightly above 2% in months to come.
The Bank’s November statement said “Monetary policy could respond in either direction to changes in the economic outlook in order to ensure a sustainable return of inflation to the 2% target. The Committee will, among other factors, monitor closely the responses of companies and households to Brexit developments as well as the prospects for a recovery in global growth.”
If economic growth falters following Brexit, the Committee could vote to reduce rates, but if the economy recovers and inflation exceeds the 2% target, it may decide to raise rates. The Bank has said any increases would be “at a gradual pace and to a limited extent.”
Why it’s important to review your mortgage
Although no-one knows which way rates will move next, if you have a variable rate mortgage, it’s important to think how you’d cope financially if rates went up.
If you think you might struggle to afford steeper payments, it may be worth considering locking into a fixed rate mortgage. This type of mortgage can provide valuable peace of mind that your payments won’t change if interest rates rise.
If, however, you think interest rates are likely to remain low for the foreseeable future, and that we may see a cut in months to come, you may prefer to opt for a tracker mortgage. This type of mortgage tracks the Bank of England base rate, plus a set percentage.
Speak to one of our brokers if you’re not sure which type of mortgage is right for you, or you can search for the best mortgage deals here.
Base rate held in split decision