Bank of England Holds Base Rate Again

With plenty of lenders announcing rate increases in the past couple of weeks, borrowers will have been left wondering at which point we will see a genuine downward trend in interest rates.

The most recent Bank of England hold in March coincided with several big name lenders to reduce their residential and BTL rates, including NatWest, Barclays and Halifax. This didn't last however, with swap rates rising throughout April and mortgage providers adjusting their prices accordingly.

12 month inflation sat at 3.2% in March (3.4% in February), with the Bank of England target of 2% wanting to be met before a cut to the base rate would likely be considered. There are forecasts of inflation getting much closer to the 2% throughout April and May, but the Bank of England may want to see this sustained for a period, rather than cutting rates as soon as the target is met.

US inflation will be another significant contributor to rates reducing in the UK. US inflation is currently around 3.5%, with car insurance and electricity costs remaining unusually high compared to other goods and services. Cutting UK rates significantly before the Federal Reserve could weaken the pound and push UK inflation higher, which is why the Bank of England will be taking this into account.

The European Central Bank looks likely to make rate reductions around June. This could provide the Bank of England justification in making an initial rate cut over summer, with further cuts then dependent on the US situation through the autumn and post presidential election time.