The Bank of England (BoE) kept the base rate at 0.10% but said an increase could be expected “over the next few months”.
today Monetary Policy Committee (MPC) the vote was divided seven to two in favor of postponing the rate change.
Governor Andrew Bailey, Ben Broadbent, Jon Cunliffe, Jonathan Haskel, Catherine Mann, Huw Pill and Silvana Tenreyro voted to keep the rate while Dave Ramsden and Michael Saunders voted to increase the rate to 0.25%.
The next meeting will be on December 16.
The market braced for a base rate hike to curb rising inflation, which has exceeded the central bank’s 2% target since May.
In the minutes of the meeting, the committee said it had decided that the current stance of monetary policy remained appropriate, but that it would be “necessary over the next few months to increase the bank rate. to bring CPI inflation back to the 2% target on a sustainable basis “.
Inflation is currently 3.1%, but it is has been suggested that this increase is only temporary. This fueled theories that the base rate would not rise as sharply or as soon as some had predicted.
Despite this, lenders anticipated a change this week by raising the price of low value mortgages (LTVs) to maximize margins. It was also a response to a recent hike in swap rates.
Andrew Montlake, Managing Director of Coreco, said: “Money markets have already factored in a potential rate shift as inflation begins to weigh in, but many believe this is a temporary situation and that inflation will start to slow down early next year. “
He also indicated that a change in the base rate would likely occur in the first quarter of 2022.
“In truth, this is a delicate balancing act with the Bank of England keen to avoid anything that could derail a recovery on one side, or wait too long to be late for the other, leading to faster and more marked increases. While these decisions remain on a razor’s edge, one thing we do know is that we should all prepare for rate hikes as soon as possible, ”he added.
It has been widely predicted that the base rate will drop to 0.25% by next spring, moving away from the assumption that the record 0.1% rate will be held for a few years.
Last month, Capital Economics revised its forecast to suggest that the base rate would reach 0.25% by 2022, before rising to 0.5% by 2023. The market analyst initially said that the rates would increase to 0.5% by 2024.
Nathan Emerson, Managing Director of Propertymark, said: “It is only a matter of time before the base rate is increased, with many expecting that to happen today.
“When it does, mortgage rates will inevitably rise, but it’s important to keep things in perspective as the cost of borrowing remains low from historical levels.“
Shekina is the Business Writer at Mortgage Solutions. She has over four years of experience in the B2B publishing market, with previous industries such as accounting, pets, funeral directors, hospitality, retail and jewelry. She currently reports on mortgage market news and liaises with financial clients to produce sponsored content. Follow her on Twitter at @ShekinaMS