In a surprise move, the standard base interest rate held at 5.25% after the Bank of England’s Monetary Policy Committee (MPC) meeting on Thursday. The experts and others forecasted a 0.25% increase that would have put the rate at 5.5% in September. However, the rate held ending the consecutive meeting increases that had lasted through fourteen meetings since December 2021. The rate is now considered the possible peak rate and will be allowed to work against inflation.

The vote was close among the MPC members with the majority keeping the rate steady at five to four. The Bank of England governor, Andrew Bailey, cast the final decisive vote to hold the rate. He had been very vocal as of late in his belief that the peak rate had either been met or would be met if the September vote called for an increase.

The confidence that inflation has met its match and will soon reach the target rate of 2.0% from the peak base rate of 5.25% is expected to put lenders in a more competitive mode and cheaper rates are expected to be attached to new released mortgage and remortgage products.

There will not be a MPC meeting in October with the final meetings for 2023 scheduled for November and December. 

Many considered the move of the MPC surprising due to the absence of a scheduled meeting next month. For some, they consider it a risky move in that inflation could stick around much longer than desired without a higher rate to curb spending.

Inflation was reported on Wednesday to have fallen to 6.7% in August from the 6.8% reported in July. It was a decline, but far from the target rate of 2.0%. This is why some economists are expecting the year to end with another rate hike taking the base rate to 5.5% and at the latest another rate hike could occur before the end of the first quarter of 2024.

It appears that the MPC is intent on taking the slow race against inflation as it remains at a 15-year high and while the news of a steady vote by the committee will be welcomed by many borrowers worried about higher costs, it means inflation will be with us for longer. 

Inflation is seen as more of the enemy of household budgets than higher interest rates, despite rising interest rates getting most of the attention. The cost-of-living increases cause a long and drawn-out negative impact on consumers.

Inflation had reached a 40-year high when in double digits, and promises have been made to cut inflation by at least half of its peak at 11% by the end of the year. 

Meanwhile, with lenders feeling their risk in lending has dropped and a greater need to grab the attention of borrowers who have been frightened off, interest rates attached to mortgages and remortgages are already starting to drop. It is therefore a good idea for homeowners to shop for a remortgage to determine what savings they could find.

This is especially true since many would have expected a rate hike to put the lowest interest rate products out of reach and new higher offers replacing them. Rather than facing higher borrowing costs, homeowners can expect their shopping efforts to pay off with rates more attractive than would have been expected following the MPC meeting.

It is the most encouraged step to take by experts for homeowners that have come to the end of their mortgage term or are nearing the end. Rather than allowing their lender to move them to their standard variable rate (SVR), choosing a remortgage is likely to get the homeowner the lowest interest rate. A remortgage also offers the choice to take a fixed rate to lock in the rate against any further increases by the MPC.

Visiting the website of a remortgage broker could put numerous remortgage quotes in hand to review and compare from a variety of remortgage lenders. Brokers might also have an exclusive deal from a remortgage lender not offered directly to borrowers from the lender. Homeowners could also gather quotes by going website to website of lenders. 

It should be noted that lenders could shift away from their competitive mode without any change by the MPC. Therefore, while rates are better than they were expected to be and savings can be found by avoiding a SVR, homeowners should shop sooner rather than later and take advantage of the current lending market while they can.