Bank of England to maintain bank rates at 5.25% 

14:10

Bank of England presses pause button - Hargreaves Lansdown

Giving her in-depth analysis on the Bank’s decision, Hargreaves Lansdown’s head of money and markets Susannah Streeter said the move to push the "big red pause button" has prompted a "rush of relief for companies and consumers bearing the brunt of higher borrowing costs".

She added: "Although this is likely to be the last hike in the cycle, the bank is still keeping the door open to another rate hike, if inflationary pressures persist, although with signs that demand is being squeezed out of the economy, the hold button is set to stay in place for a considerable time.

The surprise drop in inflation over the year to August, despite the upwards march in oil prices, saw the bank fast forward its decision to halt the relentless rise in interest rates. The sharp fall in core inflation, stripping out volatile food and fuel prices, clearly took policymakers by surprise given that last month only one policymaker had voted for a pause.

"This time the decision was made to keep rates on hold by a majority of five to four, signaling the growing strength of feeling that the economy is slowing fast and previous rate hikes, once left to work their medicine will be enough to push prices lower.

Although hot wage growth is still a lingering worry, other data showing unemployment rising and companies being more reticent to hire staff, policymakers see the labour market cooling more quickly in the months to come.

"There effect of previous rate hikes is yet to be felt and more tranches of mortgage holders will be forced to switch to more expensive deals in the months to come, denting their spending power. Even though we’ve had this much longed for pause, it doesn’t mean that we’ll see rate cuts any time soon and the possibility of another rate hike is still in the wings.

"The language in the minutes, highlighting the need for restrictive monetary policy to continue, signals that higher rates are set to linger, most likely until the back half of next year. Of course if a recession emerges, there is a chance that rate cuts may be brought forward, but the policymakers are still hoping to avoid that eventuality and by pausing now fingers are crossed that inflation will keep coming down but the economy will still avoid a hard landing."

12:53 

Mortgage anxiety remains as interest rates held - Money Advice Trust

Reflecting on today’s decision, the Money Advice Trust’s acting chief executive David Cheadle said: “Today’s interest rate decision may come as a small relief, but it will do little to quell the anxiety for people who are already behind with their mortgage – and the many more worried about higher repayments in the future. 

“As mortgage payers roll off fixed-rate deals over the coming months, we can sadly expect many more shocks to household budgets.  And renters are far from immune from the effects of higher rates, as many landlords pass these higher costs onto their tenants.  

“Anyone worried about their mortgage should reach out to their lender. You may be surprised at what they can do to help.  

“And no-one needs to go through this alone – whether you are worried about paying your mortgage, rent, credit cards or other bills, you can always seek free, independent advice from National Debtline.” 

12:41

Interest rates will need to be "kept high enough, for long enough" to bring inflation back to two percent target - Bank of England 

Explaining the Bank’s decision, governor Andrew Bailey said: "Today, we’ve decided to hold interest rates at 5.25%. This is the first time we’ve held rates in almost two years. 

"Inflation is falling and we expect it to fall further this year. That is welcome news. Our previous increases interest rates are working. But let me be clear that inflation is still not where it needs to be and there is absolutely no room for complacency. 

"We’ll be watching closely to see if further increases are needed. And we will need to keep interest rates high enough, for long enough to ensure that we get the job done. Whatever happens, we’ll do what is needed to get inflation back to normal."

12:37 

The Bank of England must STOP not just PAUSE rate hikes - deVere Group 

Commenting on the news, Nigel Green - chief executive of deVere Group - said: “We champion the Bank of England’s move to hold interest rates steady, but the central bank policymakers should go further and commit to stopping the hiking agenda, rather than just pausing it.

“The battle against inflation is gradually being won. Further squeezing already weak economic growth through making borrowing costs for consumers and companies down the line could leave long-term scars on the UK economy.

“Further stifling economic growth by resuming rate rises next time around will lead to yet more decline in investment, entrepreneurial activity, development, innovation – and therefore jobs and a decline in overall economic well-being. As such, this is now the time for the BoE to stop - not pause - interest rate hikes. 

“The time lag for monetary policies is notoriously long. It typically takes about two years to two years for the full effect of rate hikes to filter fully into the economy – and this is where we are.

“We’re now beginning to see the drag effects on the economy with households and businesses becoming considerably more cautious. The case for stopping rate hikes from now is compelling.”

12:30

Consumer credit will continue to be impacted despite Bank of England decision - Equifax

Responding to the bank’s decision, Equifax UK’s chief data and analytics officer Paul Heywood said:

“Today’s decision to maintain the current base rate is a vote of confidence in the economy from the Bank of England; a sign that its work over the last 18 months has begun to bear fruit. This shift in approach from the Bank should begin to give lenders the confidence to lend to more people, more often.

“However, many consumers will find themselves continuing to weather a mix of high mortgage rates and cost of living crisis impacts. For this reason, Equifax, and our lending partners, are well prepared to ensure that consumers are effectively supported throughout their borrowing journey and can access the credit they need to live their financial best.”

12:28

Pound to six-month low

Following the decision to put an end to the bank rate hikes, sterling - which was already weak before the announcement - has now dropped to $1.2234, the lowest since the end of March this year. 

12:22

Pause in rates will bring relief, but housing costs most significant "pressure point" for people’s finances - StepChange Debt Charity

Responding to the Bank of England’s decision to maintain bank rates at its current 5.25% level, StepChange Debt Charity’s director of external affairs Richard Lane 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. Eighteen 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.”

11:20
Small firms call for end to interest rate rises 

Responding to the news that CPI stood at 6.7% in the year to August 2023, down from 6.8% in July, Martin McTague, National Chair of the Federation of Small Businesses (FSB) said:

“It’s fair to say small firms will be relieved there wasn’t a rise in inflation, as some had predicted, but this result is far from the substantial fall they were hoping for.

“The core inflation drop is good news, although the fact that fuel contributed the most on the upward side to inflation is a concern. If pump prices rise further, this will have knock-on effects to almost all sectors.  

“With signs that interest rate rises are starting to bite, tomorrow’s base rate decision by the Bank of England has to be the peak for rates, one way or another. Leaving rates high for longer than needed will devastate the chances of an economic recovery.

“Small firms are living with the effects of inflation that has been far higher than the target for many months now, so today’s inflation results aren’t enough alone to remove their worries about the economic situation, especially given the fall in GDP announced last week.

10:48
Pound takes a hit

Sterling has dropped to its lowest level since April, dropping below $1.23.

Without clarity over whether interest rates will rise or stay the same, the pound has suffered.

10:22 
Halloween on Threadneedle Street

Alastair Douglas, CEO of TotallyMoney commented, “Halloween may be a month away, but the Bank of England has already had a Nightmare on Threadneedle Street this year. It’s no surprise that public confidence in the Bank is at a record low — the forecasts have failed, and the rate hikes have struggled to slow the cost of living at the planned pace. However, for the third month in a row, the dial has moved  — and in the right direction.

“It’s unlikely that interest rates will come down any time soon, and lenders must provide customers with support and value. Some have been reluctant to pass on the benefits of the hikes to savers, while others are charging the UK’s 679k Standard Variable Rate mortgage customers up to 9.49% interest on their borrowing.

“Sustained financial stress has already pushed people to breaking point — they’re missing bills and slipping into mortgage arrears. Support is slim, and more people are taking out more credit — including a third of renters who have used it to keep a roof over their heads.

“Regulators, banks, and the government need to help the people they serve. The crisis is far from over, and at this rate we’ll be feeling the impact for years to come.“