The Bank of England’s Monetary Policy Committee voted by 7-2 to leave the base rate unchanged at 4% in September, as it continues to try to balance managing inflation and supporting economic growth.
The decision follows the latest figures from the Office for National Statistics (ONS), which showed that the Consumer Prices Index measure of inflation held steady at 3.8% in the 12 months to August, the same rate as in July. Whilst this is a marked improvement on the double-digit inflation seen in 2022, it is still nearly double the Bank’s 2% inflation target.
Although price growth in some areas such as air fares slowed in the year to August, the overall rate of inflation was kept high by steep food prices, with costs rising at the fastest pace since the start of 2024.
When inflation is high, interest rates usually remain high to make the cost of borrowing more expensive. This reduces consumer demand for goods and services and helps ease upward pressure on prices. Conversely, when inflation is lower, interest rates are more likely to fall, so that borrowing costs become cheaper, which in turn encourages spending and stimulates economic activity.
Despite the pause in rate cuts, many analysts still expect interest rates to gradually decline over the coming months - although the exact timing remains uncertain. For now, borrowers may need to be patient and wait until inflation comes down further before we see any significant drop in borrowing costs.
Don’t delay mortgage decisions
If you’ve found somewhere you want to buy or your current mortgage is due to end in the next few months, it’s a good idea to start looking at which options might be available to you rather than waiting for rates to drop further.
Mortgage rates have edged up in recent weeks and although they’re not sky high, borrowers are being forced to make quicker decisions as the market remains unpredictable. You can use our Mortgage Finder to see which deals you could be eligible for now and how much your monthly payments might be.
Once you’ve secured a rate in advance, you’ll have the opportunity to review your options before your next deal starts and potentially switch to a lower rate at that point if one becomes available.
