Good news, limbo or a blunt stick? What experts say Bank’s decision means for costs, mortgages and savings
Reaction is coming into the Bank of England’s decision to hold interest rates, with the Unite union pouring scorn on the Monetary Policy Committee’s “inertia”.
Cost of living
“Inertia from the Bank of England isn’t going to help an economy on life support,” general secretary Sharon Graham says.
“Rising inflation is a concern, but as we’ve seen throughout the cost-of-living crisis, high interest rates are a blunt stick hitting workers and their families the hardest.”
Professor Ashwin Kumar, director of research and policy at IPPR, says the hold leaves the British economy in a “limbo period”.
He said there is a time lag between the announcement of tax rises and the fruits of higher spending, which has “contributed to negative sentiment”.
“We need to see and hear more about the government’s plans for investment in transport and infrastructure because these are crucial to economic growth.”
Mortgages
Jenny Ross, editor of Which? Money, says the decision will come as “a disappointment to both prospective buyers and those remortgaging”.
Homeowners coming to the end of their fixed rate terms will likely face “considerably higher” monthly repayments than they’re used to, she says.
But Simon Gammon, managing partner at Knight Frank Finance, is more optimistic as the mortgage market heads into the spring.
Lenders have created more generous underwriting criteria and the new season marks the start of a new financial year with fresh lending targets, he says.
“All this can lead to an increase in competition and push further reductions in pricing.”
Kevin Roberts, managing director of L&G’s mortgage services business, agrees the mortgage market has “had a strong start to the year”.
He says there has been a 51% year-on-year increase in first-time buyer mortgage searches.
“There are plenty of reasons for prospective homebuyers to be optimistic, with healthy competition among lenders and the return of sub-4% mortgage rates.”
Savings
This is “good news for savers”, says Mark Hicks, head of active savings at Hargreaves Lansdown.
They can expect “another month of robust rates”, with the best fixed savings deals hanging on above 4.5% and the best easy access at 4.75%.
Competition in the cash ISA market also “remains impressive”, he adds, so you can still get 5% on easy access savings as the deadline approaches to take advantage of your ISA allowance.
But Rob Morgan, chief investment analyst at Charles Stanley, says today’s decision “will make little difference” as banks set rates according to expectations, which haven’t altered.
“Two or three more cuts are still anticipated before the year end.”