The Bank of England has held the base rate at 4.75%, with 6 members voting to hold the rate and 3 voting to reduce it.

The Bank of England has held the base rate at 4.75%, with six members of Bank’s Monetary Policy Committee voting to hold the rate and three voting to reduce it.

The rate of inflation has risen recently, to 2.6% in November, above the bank’s 2% target.

The bank’s Monetary Policy Committee (MPC) said rising geopolitical tensions, the election of Trump and trade uncertainty, alongside the government’s recent £40bn tax-raising budget, mean that growth is faltering, while inflation risks remain.

Three members of the nine-strong panel – the deputy governor, Dave Ramsden, and economists Swati Dhingra and Alan Taylor – preferred a 0.25% reduction in borrowing costs.

However, Andrew Bailey, the Bank’s governor, was cautious as to when the Bank might be able to announce future cuts: “We think a gradual approach to future interest rate cuts remains right, but with the heightened uncertainty in the economy we can’t commit to when or by how much we will cut rates in the coming year,” he said.

Trump’s victory could have an impact on prices globally because he plans to introduce tariffs on imports, which some economists estimate could cost the UK billiions.

Meanwhile, UK retailers have also implied prices could rise while jobs could be at risk after the Chancellor, Rachel Reeves, announced a rise in Employer’s National Insurance contributions in her autumn statement.

What does this mean for mortgage rates?

The base rate influences the interest rates that many lenders charge for mortgages, loans and other types of credit they offer people.

It has been cut twice in 2024, firstly in August and latterly in November.

Mortgage rates are currently sitting between 4% to 4.5% for 2- and 5-year fixes.

According to mortgage broker Mojo, which is part of the Zoopla family, the average 2-year fixed rate deal is currently 4.46% for a 60% LTV mortgage, while the average 5-year fix for the same LTV is 4.27%.

Some economists are predicting that a 6-3 split among the committee makes a future cut in interest rates more likely, when the MPC meets again in February.

However others are exercising caution, as the Bank watches how companies respond to Reeves’s Autumn Statement.

Key takeaways

  • The Bank of England has voted by 6-3 to hold the Base Rate at 4.75%
  • However in a statement, the Bank’s Monetary Policy Committee says it plans a series of gradual cuts in the future
  • The base rate, also known as the ‘bank rate’ or the ‘interest rate’, affects the rates that lenders charge their borrowers