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Bank of England Holds Interest Rates At 5%

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    UK Interest Rates Remain at 5% As Core Inflation Surges

    The Bank of England has voted to hold UK interest rates at 5%. This decision comes as no surprise after inflation data revealed core inflation jumped to 3.6% in August despite headline inflation holding steady at 2.2%.

    In August 2023, the base rate was set to its highest level in sixteen years – 5.25% – and remained unchanged until the BOE decided to lower it to 5% in early August this year.

    The Bank of England’s Base Rate can heavily influence the rates set by banks and money lenders, so a cut could have a notable effect on buy-to-let property costs.

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      BOE Likely to Cut Rates Later in the Year

      According to the BBC, board members were split on the decision, with 8 choosing to hold interest rates at 5% and 1 deciding to lower them to 4.75%.

      The BBC believes the BOE are likely to cut rates again, most likely this year, but now is just not the right time.

      Andrew Bailey, Bank of England Governor, stated that cooling inflation pressure means that the Bank should be able to cut interest rates gradually over the upcoming months.

      He added: “It’s vital that inflation stays low, so we need to be careful not to cut too fast or by too much.”

      Sam Mitchell, CEO of Purplebricks, commented: “Despite the Bank of England’s decision to hold interest rates today, we’ve seen strong momentum build in the housing market in the last month: mortgage rates are at 18-month lows, listings are at multi-year highs and relative political stability has encouraged buyers to forge ahead with their purchasing decisions.”

      The Bank of England’s committee will meet next on 7th November, after the Budget is announced.

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      What Does This Mean for the Future?

      Many economists believe that the Bank should now focus on maintaining the right balance between keeping inflation close to target and ensuring the health of the wider property market economy.

      Rightmove expects more rate cuts to come before the end of the year. Matt Smith, Rightmove’s Mortgage Expert, said: “We’re still expecting two rate cuts before the end of the year, and home-movers should continue to see a downward trend in mortgage rates this side of Christmas.

      “I think overall, there’s likely to be quite a moderate response from lenders in response to today’s news – and whilst rates should continue to come down, mortgage lenders’ funding costs are unlikely to come down significantly, which wouldn’t leave heaps of room for dramatic mortgage rate cuts.”

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      Author

      Reece Pape

      Reece Pape is a property writer at RWinvest. Utilising up-to-date property statistics and data, Reece aims to keep investors informed on the latest market developments.

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