The Bank of England’s Monetary Policy Committee (MPC) will gather for the last meeting of 2023 on Thursday. It is expected the members will hold the standard base interest rate steady at 5.25% due to the recent decline in the inflation rate. The MPC set base rate reached 5.25% in August and has remained so through votes in September and November. The same choice will likely result in December, but there are those that would hope for a rate cut.

A cut in the rate would be as much of a surprise as a rate hike. However, it was in December 2021 that the MPC surprised with a rate hike to move from the historically all-time low of almost zero at 0.1% to 0.25%. The rate hike was expected in the coming months, but happened sooner than was forecasted. So, it is always a possibility the MPC could end the year with another surprise move.

The hopes for a cut, and the possible votes from members for one, are due to the fear that economic growth will be slowed and because of reports of increased joblessness. The continued difficulties for homeowners struggling with repayments has also been a major concern.

Perhaps, the current lender rates will not be the reason for a cut, but more the reason to keep them steady, for despite the current base rate, there are lenders with mortgage and remortgage offers below the Bank’s 5.25% rate.

As rates climbed, borrowers backed away or they were closed out of the lending market. The lack of demand sent lenders into a competitive mode which has benefitted those seeking to save money. However, without a rate cut by the MPC, lenders could pull their unexpectedly low rates and replace them with little notice.

This is a warning to those waiting to take advantage of current rates as well as to those expecting a rate cut that might not come for months, if at all in 2024.

Without the current rate being held steady there are those that believe inflation will become long seated and will not offer eventual relief, for inflation is seen as a greater enemy to economic strength and growth than higher interest rates.

Decisions made now at the government level are considered to not filter through to the economy for 18 months. This means that the real impact of the December MPC vote on the base rate will not be felt in the economy until 2025. Decisions, therefore, are made with deep consideration and many factors are at play in the discussions of the MPC than what is being experienced now by borrowers, home buyers, homeowners, home sellers, businesses, and households. The consideration of the current choices needing to trickle down into the economy to create an impact for households and businesses is exactly why hardships must sometimes must be endured to bring about a better outcome later.

It is therefore important that borrowers, including home buyers and homeowners, stay ever aware of the current offerings and whether the lending market is offering opportunities that should be considered, waited out, or taken advantage of to find the greater savings benefit.

Inflation is at 4.6%, which is more than double the target rate set by the Bank of 2.0%. This is why there could be a rate hike, but just as there is not likely to be a cut for specific reasons, the votes to increase the rate are expected to fall short of the majority. It could happen, but experts believe the MPC will hold off and see how inflation performs into the coming year and close out this one with a December meeting that holds the rate steady instead of increasing it as the last two December MPC meetings did.