Bank of England holt bank rate hikes after shock inflation drop

At its meeting, the MPC voted by a majority of five to four to maintain its position – with the four other members preferring an increase of 0.25% to 5.5%. The committee also voted unanimously to reduce the stock of UK government bond purchases held for monetary policy purposes.  

In response, StepChange’s director of external affairs Richard Lane believes the pause will bring relief, but explained the pain for households is far from over. He said: “With interest rates now looking likely to remain higher for much longer than might have been expected, housing costs have rapidly become the most significant pressure point for household budgets.  

“18 months ago many wouldn’t have envisioned facing such steep rises in their mortgage or rent payments. However, the rise in rates has now impacted millions of households, with our latest YouGov polling revealing that more than a third (36%) of mortgage holders have seen their mortgage increase by 10% or more. 

“The pain of a sustained period of high interest rates is starting to be felt by mortgage holders. StepChange’s latest client data reveals a slight increase in the proportion of clients with mortgage arrears, while figures from the Bank of England last week revealed that UK mortgages in arrears jumped to a seven year high.  

“However, it’s not just those with mortgage who are feeling the effect, as private renters continue to face staggeringly high rents as many of their landlords pass on higher borrowing costs.” 

The news follows the shock drop in Consumer Prices Index inflation yesterday (20 September), dipping by 0.1% between July and August – going from 6.8% to 6.7%. It came because of prices being at a more moderate 0.3% when compared to the 0.5% figure seen during the same period last year.

  
This went against the expectations of most commentators – who expected a small rise of around 0.2% or 0.3% – with even chancellor Jeremy Hunt saying that he expected a “blip” increase this month as data suggested average fuel prices jumped back above £1.5o a litre.