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Interest rates - latest: Bank of England criticised for ‘overly cautious’ rates decision

The Bank of England has been criticised as ‘overly cautious’ after it maintained interest rates at the same level, despite a fall in inflation.

Figures on Wednesday revealed that inflation fell to 3.4 per cent in February – down from 4 per cent in January and the lowest since September 2021, when it was 3.1 per cent.

The positive news on Wednesday came ahead of the BoE’s latest interest rate decision at noon on Thursday, with policymakers keeping rates on hold at 5.25 per cent.

Following the decision, BoE governor Andrew Bailey said: “In recent weeks we’ve seen further encouraging signs that inflation is coming down.

“We’ve held rates again today at 5.25% because we need to be sure that inflation will fall back to our 2% target and stay there.

“We’re not yet at the point where we can cut interest rates, but things are moving in the right direction.”

However, the decision prompted criticism from the The Institute of Chartered Accountants in England and Wales (ICAEW) who said the BoE remained ‘overly cautious’ on rate cuts given the inflation slowdown.

Key Points

  • Bank of England keeps interest rates at 5.25 per cent

  • What does the property industry think of rate being held?

  • Interest rates will fall to 3 per cent by 2025 - senior economist

  • What are interest rates?

Welcome

Wednesday 20 March 2024 17:59 , Joe Middleton

Hello and welcome to the Independent’s live coverage of the Bank of England’s latest decision on what they should do with interest rates, which are currently at 5.25 per cent.

Speculation is rife in financial markets that policymakers will hold steady and choose to keep interest rates at the same level.

Read our preview of the decision here:

Bank of England set to hold interest rates despite expected fall in inflation

Lowest inflation since 2021 brings hope of summer interest rate cut

Wednesday 20 March 2024 18:01 , Joe Middleton

The Bank of England’s decision on what it should do with interest rates comes after better-than-expected inflation figures.

The figures released by the Office for National Statistics (ONS) on Wednesday morning showed that inflation was 3.4 per cent in February, which is slightly lower than the 3.5 per cent predicted by economists.

This is the lowest level inflation has been at since September 2021. The latest figures are moving gradually closer to the BoE’s 2 per cent inflation target.

Read our report here:

Lowest inflation since 2021 brings hope of summer interest rate cut

Inflation eased more than expected in February

Wednesday 20 March 2024 18:46 , Sam Rkaina

Inflation eased back by more than expected in February, boosting hopes that a cut in interest rates could be on the cards within months.

Official figures showed Consumer Prices Index (CPI) inflation fell to 3.4% in February, down from 4% in January and the lowest level since September 2021, thanks to the cost of food and eating out rising more slowly.

Chancellor Jeremy Hunt hinted that the “decisive” drop in inflation could give him room to further reduce national insurance, but played down suggestions that this would mean pre-election tax cuts in an autumn statement.

Experts said inflation is now likely to fall back below the Bank of England’s 2% target in April or May, thanks to the scheduled 12% fall in the energy price cap on April 1.

This could pave the way for the Bank to start cutting rates possibly as early as June, according to many economists.

Chancellor says inflation figures could open door for interest rates drop

Wednesday 20 March 2024 19:20 , Sam Rkaina

Mr Hunt said: “Inflation has not just fallen decisively but is forecast to hit the 2% target within months.

“This sets the scene for better economic conditions which could allow further progress on our ambition to boost growth and make work pay by bringing down national insurance as we work towards abolishing the double tax on work.”

He told broadcasters: “As inflation gets closer to its target, that opens the door for the Bank of England to consider bringing down interest rates, that brings down mortgage rates, that makes a very big difference.

“It’s far too early to know whether we’ll have another fiscal event before the election, but what I would say is that what you can see is the difficult decisions the Government has taken over the last year are paying off.”

Chancellor Jeremy Hunt (PA Wire)
Chancellor Jeremy Hunt (PA Wire)

Sunak says 2024 will be ‘year economy bounces back’ as he battles to keep job

Wednesday 20 March 2024 20:00 , Sam Rkaina

A defiant Rishi Sunak insisted he would still be Prime Minister after May’s local elections as he dismissed “Westminster gossip” about Tory plots against his leadership.

Mr Sunak addressed Conservative MPs in Parliament as he battled to assert his authority and rally his party behind him following days of speculation about his position.

And in a BBC interview he insisted his plan for the country was working and “2024 will prove to be the year that the economy bounces back”.

Speculation is rife that rebel Conservative MPs are lining up potential successors should Mr Sunak face a no confidence test before a general election.

Heavy defeats for the Tories in May’s local elections could heap pressure on Mr Sunak.

But the Prime Minister said he would still be in No 10 after the local elections because “the things that we are doing are making a difference”.

Asked whether he would be Prime Minister after May, he told the BBC: “Yes. Because the things that we’re doing are making a difference, right.

“And there’ll always be noises off, there’ll always be people focused on what’s happening at Westminster. But that’s not, when I go around the country every week talking to people, that’s not what they talk to me about.

“What they are talking to me about is making sure that inflation continues to come down, that energy bills and mortgage rates are falling, that we are cutting taxes so that their family have more money in their bank accounts every month… That’s what we’re delivering on the economy.”

Prime Minister Rishi Sunak leaves 10 Downing Street to attend Prime Minister’s Questions on Wednesday (Stefan Rousseau/PA) (PA Wire)
Prime Minister Rishi Sunak leaves 10 Downing Street to attend Prime Minister’s Questions on Wednesday (Stefan Rousseau/PA) (PA Wire)

PM says ‘we have turned the corner’ on economy

Wednesday 20 March 2024 20:55 , Sam Rkaina

Mr Sunak was buoyed by a fall in inflation to 3.4% in February, down from 4% in January, with Chancellor Jeremy Hunt hinting the improved economic picture could result in tax cuts and reductions in interest rates – which could improve voters’ finances in the run-up to an election later this year.

The Prime Minister said: “I do believe that at the start of this year we have turned a corner after the shocks of the past few years and we are in a new economic moment and 2024 will prove to be the year that the economy bounces back.”

He sought to play down concerns about reports of a backbench plot to oust him as Conservative leader in the interview, insisting that his focus was on the country at large.

“Look, these things don’t infuriate me because you know what, fundamentally, I’m just not interested in Westminster gossip,” the Prime Minister said.

“It’s just that is not what’s important. What’s important is the future of our country, and people’s financial security and the peace of mind that they rightly deserve… That’s what I get up every morning to do and that, I will work every hour God gives to deliver for people.”

Surprise inflation drop could mean cheaper mortgages for home owners by the summer

Wednesday 20 March 2024 21:34 , Sam Rkaina

UK inflation has fallen back to 3.4 per cent, the lowest level in more than two and a half years, boosting hopes that the Bank of England could look to cut interest rates in the summer.

The larger-than-forecast decline is a significant boon for Rishi Sunak, who made reducing inflation one of his key economic pledges. Getting inflation down to 2 per cent is also a key target for the Bank.

The figures released by the Office for National Statistics (ONS) on Wednesday morning showed that inflation was 3.4 per cent in February, which is slightly lower than the 3.5 per cent predicted by economists.

This is the lowest level inflation has been at since September 2021. Despite inflation falling it does not mean that prices are falling, only that they are rising at a slower pace.

Click here for the full story.

 (PA)
(PA)

UK rents skyrocket at fastest rate on record as tenants hit by ‘cost of renting crisis’

Wednesday 20 March 2024 22:33 , Sam Rkaina

UK rental costs have increased at the fastest rate on record as the housing market continues to be impacted by constricted supply and higher interest rates.

The average UK rent increased by 9 per cent in the 12 months to February, up from 8.5 per cent in January, the Office for National Statistics (ONS) said.

It is the highest annual percentage change since the UK data series began in January 2015. Private rent inflation was highest in London, at 10.6 per cent, and the lowest in the North East at 5.7 per cent.

The average monthly rent in the UK is now £1,238, which is £102 higher than 12 months ago.

However, average house prices decreased by 0.6 per cent in the 12 months to January 2024. In England, they decreased by 1.5 per cent as they also did in Wales by 0.8 per cent, but increased in Scotland by 4.8 per cent.

Click here for the full story.

Lack of supply causing rent rises

Wednesday 20 March 2024 23:30 , Sam Rkaina

Luke Murphy, associate director for infrastructure and housing at the ippr, told The Independent the UK housing market’s structural problem of a lack of supply is still the primary driver in rent increases.

“It’s a fundamental issue of supply, we have not been building enough homes for decades and that’s all kind of homes. It’s not just about the number, it’s about building many more genuinely affordable social homes.

“Our analysis shows there is a four million homes shortage over a decade and we are nowhere near building the number of affordable homes that we need. And that’s having the impact on rents we are seeing.”

Cara Pacitti, Senior Economist at the Resolution Foundation, said that the average rent in the UK is now a fifth higher than pre-pandemic in February 2020.

“With inflation falling and earnings growth cooling we can expect some better news on the horizon, and indeed market data on rental prices for new tenancies has seen slower growth in recent months. However, even if we begin to see rental price growth cooling, private renting will still remain by far the least affordable, least secure and lowest quality housing tenure.”

The Independent view: Rachel Reeves still has much explaining to do

00:30 , Sam Rkaina

In all likelihood, Britain is only seven months away from a general election that the Labour Party will almost certainly win. It is now too late for any Conservative leader to salvage the situation, simply because of that time constraint.

Inflation is dropping towards the official 2 per cent annual target; the economy may well be out of its shallow recession by now; more tax cuts are on the way. But the voters are no longer listening. They made their minds up long ago.

The reasons for the Tory defeat will mostly not be found in what happens over the next few months, but what has happened in the last few years – and, indeed, since the first Conservative-dominated administration was formed in 2010. Change feels inevitable.

Click here for the full view.

Average UK house price £2,000 lower in January than a year earlier

01:30 , Sam Rkaina

The average UK house price fell by an estimated 0.6% in the year to January 2024, according to an index.

This took the average price of a home in the UK to £282,000, which was £2,000 lower than 12 months earlier.

It followed a decrease of 2.2% in the 12 months to December 2023, the Office for National Statistics (ONS) said.

In the 12 months to January 2024, average house prices decreased in England to £299,000 (down by 1.5%), decreased in Wales to £213,000 (falling by 0.8%), and increased in Scotland to £190,000 (up by 4.8%).

Average house prices increased by 1.4% to £178,000 in the year to the fourth quarter of 2023 in Northern Ireland.

Within the English regions, annual house price inflation was highest in the North West, where prices increased by 1.0% in the 12 months to January.

London was the English region with the lowest house price annual inflation, with prices falling by 3.9% in the 12 months to January.

What exactly the fall in inflation means for your money

02:30 , Sam Rkaina

What is inflation?

Rajan Lakhani, personal finance expert at smart money app Plum, explains that inflation measures the pace at which the price of goods and services in the UK is rising.

“The ONS looks at price changes over the previous 12 months to calculate inflation. [But] the key thing to remember with inflation is when inflation is falling, like today’s announcement, that doesn’t mean prices have fallen. It just means on average prices are rising less quickly,” Lakhani said.

“For example, the ONS would measure the price of items in February 2023 and what it is in February 2024.”

What inflation fall means for mortgages

03:30 , Sam Rkaina

For Rob Morgan, chief investment analyst at Charles Stanley, mortgages and other forms of borrowing are not directly impacted by inflation.

“But many products are affected by expectations for the Bank of England base rate, which is influenced by it,” said Morgan.

“Recently, lenders have been increasing rates a little, after hopes of an earlier string of interest rate cuts receded. Today’s figures do little to move those expectations as they are already baked into market rates. However, if inflation remains on a downward trajectory and interest cuts arrive later this year as predicted, then borrowing costs should come down a little. Any falls will be modest compared to the steep rise since early 2022, though.”

Lakhani added: “Lower interest rates would be good news for mortgage holders, whether they have a variable or tracker mortgage, or are having to remortgage this year.

“Higher mortgage rates, which are influenced by the base rate expectations, have been hitting mortgage holders hard. The quoted monthly interest rate on a 2-year fixed mortgage loan to value (LTV) 75% was 1.64% in January 2022.

“The quoted mortgage rate for the same type of product two years later is 4.73%. For a 25-year £200,000 mortgage, that means an extra payment of £325 per month (£1,138 vs £813), a major increase.”

‘Data will not move the needle'

04:30 , Sam Rkaina

“We do not think the data will move the needle for the BoE meeting ,” said Matthew Swannell, Dani Stoilova and Gerardo Martinez at BNP Paribas.

“One area of the focus will be the vote split, with the largest uncertainty around whether hawk Jonathan Haskel changes his vote from a 25bp (base point) vote hike to a hold.

“By his own admission, his February vote for a hike was ‘finely balanced’, so it is difficult to call how he will vote tomorrow.

“Our expectation is that despite the BoE’s core services inflation dropping in February – which it would seem Haskel attaches some weight to – he will need further evidence of its being on a downwards trajectory before adjusting his vote. We expect an unchanged vote split.”

That would mean that only one of the nine-person committee is likely to think that conditions are right for a cut.

Economists generally agree that cuts to the interest rate will come later this year – the Bank has signalled as much recently too – but they are less sure when the cuts will come.

Direction of travel ‘encouraging'

05:30 , Sam Rkaina

The direction of travel for UK inflation is certainly encouraging and supports the case for a policy easing in the near future,” said Ellie Henderson, an analyst at Investec.

“Our base case is for a first interest rate reduction in June.

“Furthermore, it is not just about actual inflation, expectations play a strong part too.

“As inflation expectations fall, but the nominal policy rate remains constant, the real rate of interest rises, resulting in a tightening in monetary policy, without the Bank actually changing its stance.

“The MPC will have that in mind when deciding on the appropriate time to cut interest rates.

“But for the meeting tomorrow, today’s inflation numbers do not change our view, first set out in our preview, that the MPC is likely to convey the message that it has an eye on easing policy rates this year, but the hurdle to do so has not yet been overcome.”

What are interest rates?

06:30 , Sam Rkaina

An interest rate is a measure that tells you how high the cost of borrowing money is, or how high the rewards of saving are.

If you are borrowing money, typically from a bank, the interest rate on that money is the amount you will be charged for borrowing it.

It is a charge on top of the total amount of the loan and will be shown as a percentage of the overall.

Higher percentages mean paying more money to the lender for borrowing the money.

If you are saving money in a bank account, the interest rate on that money is the amount you will accrue on top of your savings. Banks will pay you a percentage of your total savings, typically at the end of the year.

The Independent view: Rachel Reeves still has much explaining to do

09:20 , Joe Middleton

In all likelihood, Britain is only seven months away from a general election that the Labour Party will almost certainly win. It is now too late for any Conservative leader to salvage the situation, simply because of that time constraint.

Inflation is dropping towards the official 2 per cent annual target; the economy may well be out of its shallow recession by now; more tax cuts are on the way. But the voters are no longer listening. They made their minds up long ago.

The reasons for the Tory defeat will mostly not be found in what happens over the next few months, but what has happened in the last few years – and, indeed, since the first Conservative-dominated administration was formed in 2010. Change feels inevitable.

Rachel Reeves still has much explaining to do

‘Recent data and economic projections have supported the case for interest rate cuts'

10:08 , Joe Middleton

Ahead of today’s Bank of England interest rates decision, Henk Potts, Market Strategist at Barclays Private Bank said:

“The Bank of England is expected to keep rates at 5.25% for a fifth consecutive meeting on Thursday and maintain the current cautious guidance. However, recent data and economic projections have supported the case for interest rate cuts. Inflation has moderated and labour markets are finally starting to ease. Headline CPI is expected to fall below the central bank’s 2% target level later in the year, with unemployment climbing to 4.5% in the final quarter.

“The Monetary Policy Committee (MPC) is likely to be laser-focused on the incoming inflation prints, labour market reports and growth figures for the first quarter. These could pave the way for a pivot to an easing stance by the May meeting, with the first 25bp rate cut pencilled in for June. With more to follow, we anticipate that the Bank Rate will finish the year at 4%.”

Breaking: Women who lost out in state pension age rise must be compensated now, landmark report says

10:36 , Joe Middleton

Women who lost out in the state pension age rise must be compensated now, a landmark report has said as it criticised the government for failing to inform them about changes.

The Parliamentary and Health Service Ombudsman has recommended that the government pay those affected compensation as it concludes that the department for work and pensions (DWP) has “not acknowledged its failings nor put things right for those women affected.”

It comes after long-awaited report into how women lost out on money due to increases in their pension age was published.

Zoe Grunewald reports.

Thousands of women who lost out in pension age rise must be compensated, report says

UK private sector growth hints country has left ‘brief recession’

10:49 , Joe Middleton

Activity across the UK’s private sector has grown steadily this month, showing further signs that the economy has climbed out of last year’s “brief recession”, according to new estimates.

The S&P Global/CIPS flash UK purchasing managers’ index (PMI), closely watched by economists, reported a reading of 52.9 in March, down slightly from 53.0 in February.

The flash figures are based on preliminary data. Any score below 50 indicates that activity is contracting, and any score above means it is growing.

Economists had expected a slightly stronger PMI reading of 53.2 for the month, according to a consensus provided by Pantheon Macroeconomics UK.

The country’s services industry - which spans businesses from pubs, restaurants and hairdressers to transport, real estate and insurance - continued to drive an uplift across the broader private sector.

However, growth started to lose momentum in March, which the firms surveyed often said was due to pressure on households’ disposable incomes.

Nevertheless, manufacturing production increased for the first time in more than a year, the survey showed.

It hints that recovery could be on the horizon for factories which have grappled with a prolonged downturn amid tougher economic conditions, and disruption in the Red Sea hitting supply chains.

Chris Williamson, S&P Global Market Intelligence’s chief business economist, said: “Further signs of the UK economy having pulled out of last year’s brief recession are provided by the provisional PMI data for March.”

Norway’s central bank keeps interest rates unchanged

11:00 , Joe Middleton

Just an hour before the Bank of England reveals its decision on interest rates, Norway’s central bank has decided to keep its at 4.50 per cent.

“The current forecast indicates that the policy rate will continue to lie at 4.5% in the period to autumn before gradually moving down,” the central bank said in a statement.

Analysts in the Reuters poll on average have forecast that Norges Bank will cut the cost of borrowing twice in the second half of 2024, to 4.0 per cent by year-end.

“In its assessment of the interest rate outlook, the committee was concerned with the possibility that if the policy rate is lowered prematurely, inflation could remain high, among other things, because the crown might then weaken,” Norges Bank said.

‘We do not think inflation data will move the needle for the BoE’

11:09 , Joe Middleton

Analysts from BNP Paribas said on Wednesday it is unlikely rates will change today and they expect them to be kept at 5.25%.

“We do not think that this morning’s data [inflation] will move the needle for the BoE meeting tomorrow,” said Matthew Swannell, Dani Stoilova and Gerardo Martinez at BNP Paribas.

“One area of the focus will be the vote split, with the largest uncertainty around whether hawk Jonathan Haskel changes his vote from a 25bp (base point) vote hike to a hold.

“By his own admission, his February vote for a hike was ‘finely balanced’, so it is difficult to call how he will vote tomorrow.

“Our expectation is that despite the BoE’s core services inflation dropping in February - which it would seem Haskel attaches some weight to - he will need further evidence of its being on a downwards trajectory before adjusting his vote. We expect an unchanged vote split.”

Switzerland becomes the first central bank to cut rates in this cycle

11:19 , Joe Middleton

Switzerland has bucked the recent trend for Western governments and decided to cut interest rates on Thursday.

It has lowered its base rate from 1.75 per cent to 1.50 per cent in a move that surprised financial markets.

‘We don’t expect the interest rate to fall until June’

11:31 , Joe Middleton

Just half an hour to go before the BoE announces its interest rates decision...

James Burgess, Head of Commercial and insolvency expert at Atradius UK, said: “The tide has finally started to turn on the cost-of-living crisis, as inflation surpasses ONS forecasts to drop to its lowest level in two and a half years. This will be hugely promising news for homeowners and buyers reliant on fixed-rate mortgages, who have been the hardest hit by rising costs and will be hoping for interest rates to fall soon.

“We don’t expect the interest rate to fall until June, but we should start to see a positive impact on fixed mortgage rates, as these are set based on interest rate outlook rather than today’s rate. If the interest and inflation rates do decrease as expected, we should see average two-year fixed rate mortgages fall back below 5% by June.

“Construction businesses should feel the impact of this over the next few months, after a challenging 12 months where completion of new housing supply dropped due to supply chain challenges and reduced consumer demand. Firms are also navigating house price challenges, balancing profitability of building projects with unstable house prices and varying consumer demand. Consumer demand needs to stabilise if we are to overcome these challenges. A positive interest rates outlook today would be very welcome by businesses in the sector and bring a much-needed boost to the housing market.”

Cost of living crisis is ending and everyone has cheered up, says Tory MP

11:47 , Joe Middleton

The UK’s cost of living crisis “is ending” and people have “cheered up”, a Tory MP has said.

Andrea Leadsom, Conservative MP for South Northamptonshire made her comments after inflation fell by 3.4 percent.

In an interview on the Sky Politics Hub on Wednesday (20 March), Ms Leadsom said: “What is really important is we have seen a fantastic drop in inflation today, that’s obviously cheered everyone up. It is what we have been working towards, is seeing the cost of living crisis end, and people take more home in their pay packets or in their salaries every day.”

Cost of living crisis is ending and everyone has cheered up, says Tory MP

BREAKING: Interest rates stay at 5.25 per cent

12:02 , Joe Middleton

The Bank of England has kept interest rates at the same level of 5.25 per cent, as widely predicted by financial markets.

Following the decision to hold rates at 5.25 per cent, BoE governor Andrew Bailey said: “In recent weeks we’ve seen further encouraging signs that inflation is coming down.

“We’ve held rates again today at 5.25% because we need to be sure that inflation will fall back to our 2% target and stay there.

“We’re not yet at the point where we can cut interest rates, but things are moving in the right direction.”

Immediate reaction... ‘There are likely to be at least two additional cuts in interest rates this year'

12:12 , Joe Middleton

Professor Joe Nellis, MHA’s Economic Advisor and Professor of Global Economy, Cranfield School of Management, said: “Yesterday’s sharper than expected fall in headline inflation for February shows that the UK economy is beginning to show signs of recovery.

“While the MPC voted to keep rates unchanged this month, optimism around GDP coupled with the downward trend for inflation indicates that they could start to cut rates sooner than expected – perhaps as early as May.

“There are likely to be at least two additional cuts in interest rates this year after the initial cut in May or June. Interest rates are likely to normalise at around 3.5 to 4% by the beginning of 2025, but they will not be falling to the record lows enjoyed by borrowers in previous years.

“The Bank of England’s default position is to set interest rates at 2 to 3% above inflation to give them some leverage and control over inflationary pressures – they would prefer to be in a position of ‘pulling on a string’.”

What does the property industry think?

12:16 , Joe Middleton

Foxtons chief executive, Guy Gittins, commented: “Homebuyers have been waiting patiently for an interest rate reduction and while it is largely expected to come this year, it seems as though they will have to wait a little longer still.

“The positive to take is that an air of stability has returned to the UK property market since rates were held at 5.25% last September and this has helped revitalise buyer activity levels in recent months.”

Lomond CEO, Ed Phillips, said: “Having previously endured 14 consecutive base rate hikes since December 2021, it’s been a case of no news is good news for the nation’s homebuyers of late when it comes to the Bank of England’s decision on interest rates.

That said, they can be forgiven for feeling a little disappointed that we didn’t see a cut materialise today, particularly given this week’s inflation figures.

And Director of Benham and Reeves, Marc von Grundherr, added: “Continued certainty is no bad thing but homebuyers are crying out for some form of relief, particularly in London where the combination of high house prices and high mortgage rates are dampening purchasing power to the greatest extent.”

Not interest rates cuts before August - senior economist

12:19 , Joe Middleton

Marion Amiot, senior European economist at S&P Global Ratings on the decision: “The Bank Of England will need to see a lot more moderation in wages and services prices before it starts cutting rates. We don’t expect that to be before August as the labor market remains tight.

“While vacancies are falling, the workforce is barely expanding, supporting pay increases that are well above productivity gains and the 2% inflation target.”

Interest rates will fall to 3 per cent by 2025 - senior economist

12:33 , Joe Middleton

Ruth Gregory, Deputy Chief UK Economist, at Capital Economics said: The Bank of England sprung no surprises, leaving interest rates at 5.25% for the fifth time in a row and, despite no MPC members no longer voting to raise interest rates, it retained its relatively hawkish guidance.

“But it is the data not the guidance that counts. And our forecast that inflation will fall further and faster than the Bank expects suggest it will change its tune in the coming months.

“That’s why we think a rate cut in June is possible and why we think rates will fall to 3.00% in 2025 rather than to 3.75-4.00% as priced into the market.”

IPPR think-tank say BoE should cut interest rates - reaction

12:46 , Joe Middleton

Reacting to today’s decision by the Bank of England’s Monetary Policy Committee Carsten Jung, senior economist at IPPR, said:

“Inflation is coming down more quickly than many predicted just a few months ago. This is largely due to global supply chains recovering and energy costs falling. But also domestic price pressures are falling quicker than the Bank had anticipated.

“All this shows the Bank of England tightened the screws too much, which is squeezing much needed future growth. The Bank should thus cut rates more quickly than its current plans. The tightening stance by both the Chancellor and the Bank of England contribute to the UK’s growth falling far behind the USA’s fast recovery.

Rates left unchanged provides little help to homeowners - Liberal Democrats

13:06 , Joe Middleton

Responding to the Bank of England’s decision to keep interest rates at 5.25%, Liberal Democrat Treasury spokesperson Sarah Olney MP said:“This is cold comfort for millions of homeowners who still face massive hikes in their mortgage bills after Liz Truss crashed the economy.

“Many families still face a mortgage cliff edge despite this news. Liz Truss’s disastrous mini-budget and the Conservative party’s economic vandalism has put intolerable pressure on people’s finances.

“This Conservative government has no good story to tell on the economy.

“The only way to break this cycle of stagnation and financial hardship is to kick this out of touch government out of office. Rishi Sunak needs to stop his desperate attempt to cling on to power and call an election.”

Rates ‘hold’ decision could soften volatile mortgage market - reaction

13:17 , Joe Middleton

Stephen Gomez, specialist mortgage adviser at Wesleyan Financial Services, said: “Another ‘hold’ decision is unlikely to lead to any drastic changes in the mortgage market.

“However, taken together with yesterday’s data confirming that inflation is slowing, it may help soften some of its current volatility – we’re still seeing some lenders increasing rates.

“The Bank of England is expected to start cutting rates sometime in the coming months.

“But for now, people remortgaging and borrowing for the first time will almost inevitably have to accept higher rates than they could get two or five years ago. It’s really important that they time to review all possible deals to make sure that whatever they’re going for is the best option for their specific circumstances.”

UK PM has ‘full confidence’ in BoE governor after rates decision

13:23 , Joe Middleton

Rishi Sunak has full confidence in the Bank of England’s governor Andrew Bailey following the decision to leave interest rates unchanged.

The prime minister’s official spokesperson said: “Interest rates are rightly a decision for the independent Bank of England.

“As I said earlier, with inflation dropping to 3.4%, real wages rising, mortgage rates starting to fall, there’s clear sign that the economy has turned a corner after the shocks of the last few years.”

Asked whether the prime minister had confidence in the governor, he replied: “Completely”.

Watch: Financial expert reveals biggest mistakes borrowers make choosing mortgages

13:56 , Joe Middleton

Mapped: See how the UK’s record rent rises impact your area

14:25 , Joe Middleton

Rent prices in the UK have seen a record annual rise from last year, according to new statistics.

On average renters across the country are now paying 9 per cent more, with large regional variations.

This is the highest annual percentage change since the start of rental data tracking in 2015, the Office for National Statistics (ONS) has said.

Mapped: See how the UK’s record rent rises impact your area

More interest rates reaction...

15:00 , Joe Middleton

David Cheadle, chief operating officer at National Debtline, said: “High interest rates are impacting more and more families each month, as mortgage payers come to the end of fixed rate deals meaning their monthly payments increase significantly. Renters are also being impacted as higher costs are passed on by landlords.

“Despite this week’s welcome drop in inflation, the pressure on household budgets is set to continue and we can unfortunately expect many more to fall into arrears.

“Anyone struggling to keep up with mortgage repayments should reach out to your lender. Lenders can do more to help than people often think, so it’s important to get in touch. And anyone worried about their finances can always speak to an adviser at National Debtline, who can work through all the options available.”

‘Overly cautious’

15:30 , Joe Middleton

Suren Thiru, Economics Director at ICAEW, said: “While interest rates staying on hold again was expected, the more dovish vote split and meeting minutes suggest that rate setters are opening the door for rate cuts later this year.

“Though this interest rate hiking cycle is firmly in the rear-view mirror, the long delay between tightening policy and its impact on the wider economy means that the heavy toll of 14 rate rises has yet to fully crystalise.

“The Bank of England remains overly cautious on the prospect of rate cuts given the startling inflation slowdown and an economy in recession, increasing the risk they prolong our economic struggles by keeping policy too tight for too long.

“With inflation on track to drop back to the Bank’s 2% target in April, an interest rate cut by August looks a distinct possibility.”

BoE remains ‘overly cautious’ on rate cuts after inflation slowdown - reaction

15:58 , Joe Middleton

Suren Thiru, economics director at ICAEW, said: “While interest rates staying on hold again was expected, the more dovish vote split and meeting minutes suggest that rate setters are opening the door for rate cuts later this year.

“Though this interest rate hiking cycle is firmly in the rear-view mirror, the long delay between tightening policy and its impact on the wider economy means that the heavy toll of 14 rate rises has yet to fully crystalise.

“The Bank of England remains overly cautious on the prospect of rate cuts given the startling inflation slowdown and an economy in recession, increasing the risk they prolong our economic struggles by keeping policy too tight for too long.”