The Bank of England (BoE) announced on Friday that it has held interest rates at 5.25%, bringing a halt to a series of rate hikes that have been in effect since December 2021. This decision followed an unexpected drop in inflation in August, despite rising oil prices and some weakening in the job market. The move mirrors the US Federal Reserve’s recent decision to pause rate increases.
Richard Lane, Director of External Affairs at StepChange Debt Charity, commented on the change, citing the impact of higher interest rates on household budgets. According to a YouGov poll conducted by the charity, over a third (36%) of mortgage holders have seen their mortgage increase by 10% or more. Furthermore, data from the BoE revealed that UK mortgages in arrears have reached a seven-year high.
Emma Steeley, Chief Executive Officer at Aro, expressed that the BoE’s decision recognizes the needs of households across the UK. She also drew attention to consumers who have been underserved by the financial system and suggested that this pause should be used to support these individuals.
David Cheadle, acting Chief Executive at the Money Advice Trust, warned that while this decision may bring temporary relief, it does little to alleviate anxiety for those already behind with their mortgage payments or worried about future repayment increases.
Paul Heywood, Chief Data & Analytics Officer at Equifax (NYSE:), viewed the decision as a vote of confidence in the economy from the BoE and suggested it could boost lenders’ confidence to lend more frequently.
John Phillips, CEO of Spicerhaart and Just Mortgages, expressed delight over the decision and saw it as positive news for mortgage holders and borrowers. However, he acknowledged that high household costs still present a challenge.
Alastair Douglas, CEO of TotallyMoney, advised those struggling with mortgage repayments to contact their lender for support. He also noted the increase in mortgage defaults since 2009.
Andy Mielczarek, Founder and CEO of SmartSave, highlighted the discrepancy between the base rate and the interest rates offered by high-street banks, urging consumers to search the market for alternative products.
Sarah Coles, Head of Personal Finance at Hargreaves Lansdown, noted that the pause in rate hikes could be good news for borrowers but less positive for savers. She added that rates could still rise in the future until inflation is under control.
Simon Webb, Managing Director of capital markets and finance at LiveMore, expressed relief over the decision but cautioned that further rate rises could still occur in future MPC meetings.
In related news, the US Federal Reserve also signaled a pause in interest rate hikes this month with a potential final hike to come later this year. Nick Timiraos, Chief Economics Correspondent at The Wall Street Journal, suggested that this could lead to financial tightening conditions not previously seen when the Fed was raising rates faster.
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