Bank of England pause interest rates after fall in inflation

Cornerstone Tax comments on the news that the Bank of England has paused interest rates rise after a fall in inflation.

The Bank of England (BoE) has decided to pause interest rates after fourteen consecutive raises, keeping the rate of inflation at 5.25%.

The primary factor for the BoE’s decision can be attributed to official data from the Office for National Statistics (ONS) released yesterday, which reported that inflation fell unexpectedly to 6.7% in August, its lowest level in over a year.

The BoE’s decision will also come as welcome news for the 1.5 million households coming to the end of their fixed rate mortgages this year.

Many were cautiously waiting ahead of the interest rate rise to see whether they would be forced to sell their homes, as a result of a potential fifteenth interest rate rise.

Currently, the average 5-year fixed-rate mortgage is sitting at 5.97%, which is 2.46% higher than in August 2022.

Group Chairman of Cornerstone Tax, David Hannah, discusses the impact of the announcement on UK households:

“I am relieved to see that the Bank of England has decided to pause interest rates and keep them at 5.25%.

“It wouldn’t have made sense for them to increase them by 0.25%, given the fact that we have seen a positive decline in inflation.

“The past interest rate increases have had a detrimental effect on Britain’s property market, most notably a significant reduction in property transactions, due to the fact that the cost of mortgages has skyrocketed as a result.

“However, if the BoE continues to see a notable drop in inflation like we witnessed in August, then I believe it will be an incentive for them to start lowering the base rate in the run-up to Christmas.

“This would mean a huge boost for consumers to start spending ahead of the holidays, bolstering Britain’s economy, and trickling down to create an even bigger boost for the property market.

“If this comes to fruition, we will witness a resurgence of first-time buyers returning to the market as mortgage interest rates fall.”

Kindly shared by Cornerstone Tax