Bank rates held at 5.25%

The decision was made during the final meeting of its Monetary Policy Committee (MPC), which voted by a majority of six to three to maintain its current position. The three other members preferred to increase bank rates by 0.25% to 5.5%.  

It comes just a day after the Office for National Statistics announced the UK economy shrunk for the first time in two months in October, with GDP falling by 0.3% in the month – with services, production and construction output all estimated to have declined, dropping by 0.2%, 0.8% and 0.5% respectively.  

Looking forward, projections from the MPC suggest bank rates will remain at 5.25% until the third quarter of 2024, before declining gradually to 4.25% by the end of 2026. CPI inflation, meanwhile, is expected to return to the two percent target by the end of 2025. 

Responding to the news, StepChange Debt Charity’s director of external affairs Richard Lane said: “With the base rate holding at 5.25% today, households are facing little respite from financial woes as we approach the new year.  

“As the Bank of England pointed out last week, there are still many mortgaged households yet to secure a new fixed-rate deal since we first saw rates increase last year. Our latest polling has shown just how difficult the last two years has been on people’s finances, with one in four people now saying they will struggle to afford Christmas this year.  

“Combined with the increase in energy bills from January, stubbornly high interest rates could spell further financial difficulties for both mortgage holders and renters well into 2024 and beyond.”