This latest decision by the Bank’s Monetary Policy Committee to maintain the rate comes amid forecasts of rising inflation.
It means the Bank of England (BoE) is positioning itself carefully ahead of energy price hikes which will have a knock-on effect on household budgets.
Susannah Streeter, chief investment strategist for Wealth Club, said: “Policymakers are playing a game of patience, slowly shuffling their latest cards of data and taking time to deliberate where inflation will land next.”
She added: “Another interest rate hike is still being pencilled in on financial markets, but forecasts of multiple rate hikes have been reined back.
“Policymakers are staying cautious, anxious not to tip the economy into reverse but remaining wary about keeping a lid on unruly inflation.”
The impact on your mortgage
If you are currently on a tracker mortgage, you will see no change to your repayments. However, with one more BoE interest rate hike predicted this year, it could be worth staying in the loop on developments as this may change.
David Hollingworth, associate director at L&C Mortgages, said tracker mortgages had gained popularity in recent times as more borrowers opted to gamble on interest rates remaining low.
He added: “Of course, there’s no guarantee and markets have still priced in the possibility of higher interest rate rises, so borrowers should consider how well they can cope with payments rising.”
If you are on a fixed rate mortgage, you will also see no change since your interest is locked in. For anyone whose deal is due to end in the next six months, however, or those looking for a mortgage to purchase a property, today’s decision will be more pertinent.
Sarah Tucker, mortgage expert, HomeOwners Alliance, said: “We’ve seen fixed rates falling in recent weeks and swap rates – which are a strong indicator of lenders’ funding costs – have continued to fall this week following the US-Iran peace deal.
“But what happens next with fixed rate mortgage pricing will depend largely on what the markets think is next for interest rates. So all eyes will be on the voting split and commentary from the Monetary Policy Committee for clues about the direction of future rate cuts.
“The reality is that nobody can predict exactly what’s next for mortgage rates. So if you have got a remortgage coming up, make sure you’re fixing it six months in advance and allowing yourself time to reprice if things do get better.”
