Interest rates kept at 5.25% in May

The Monetary Policy Committee voted 7-2 to keep the base rate at 5.25% on 9th May 2024.

Lisa Parker
May 9, 2024

The Bank of England’s Monetary Policy Committee voted 7-2 to leave the base rate unchanged at 5.25% in May for the sixth consecutive time.

Some commentators predicted earlier this year that we could see a cut in the base rate as soon as this month, but higher than expected inflation numbers in March meant that most now don’t expect to see a reduction until later in the year.Consequently, today’s decision to hold rates came as no surprise.

Much will depend on the next set of inflation results, which will take into account the new lower energy price cap introduced at the beginning of April. If inflation falls nearer to the government’s 2% target, then it’s possible the Bank of England might decide to reduce the base rate in June or August.

In its latest report, the MPC said they do expect inflation to return to ‘close to the 2%target in the near term’ but could increase again to around 2.5% in the second half of this year.

Prior to this month’s base rate decision, the Bank of England's chief economist, Huw Pillsaid in a speech that rate cuts were still "some way off" but potentially closer than they were in March. Mr Pill said: “The combination of little news and the passage of time have brought a bank rate cut somewhat closer. But the same lack of news gives me no reason to depart from the baseline that I already established.”

Why have mortgage rates increased when the base rate hasn’t changed?

Mortgage providers borrow funds on wholesale markets which they lend out to consumers. The rate they charge borrowers can be influenced by the rate they're charged themselves, known as the swap rate. Although swap rates are not the only factor in mortgage pricing, they do act as an indicator of where fixed rates may head.

Swap rates have drifted upwards and remained at a higher level for some time now after having fallen at the end of last year. This has led to several enders re-pricing their lowest fixed rates. You can learn more about recent mortgage rate increases in our latest market update Mortgage rates rise: grab a good deal while you can.

If you are considering remortgaging, it could therefore pay to act sooner rather than later if you want to take advantage of some of the best remaining deals. By securing your next deal early, you still have the option to move to a different deal before it starts if a better option becomes available.


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