Eight of the nine members of the central bank’s Monetary Policy Committee (MPC), which decides on what will happen to the Base Rate, voted in favour of maintaining the current level.
But whilst this shows the move was decisive, experts are widely predicting the much-needed cuts to interest rates will happen before the end of the year.
The decision comes as a survey by the Building Societies Association (BSA) found nearly half of consumers thought the MPC should have cut rates again today. This figure rises to 59% amongst mortgage borrowers.
Paul Broadhead, head of mortgage and Housing Policy at the BSA said: “The cut in the Bank Rate last month marked a significant turning point in what had been a difficult two and a half years.
“However, in reality shaving just 0.25 percentage points of the Bank Rate has not made a significant impact on mortgage affordability or confidence in the housing market, despite markets pricing it in to mortgage rates.
“First-time buyers, who are critical for a properly functioning housing market, are still indicating that they are unable to afford homeownership.”
Broadhead added: “We still expect the Bank Rate will reduce this year, however this is happening much later and slower than we had anticipated earlier in the year.”
How will interest rates on hold impact your mortgage?
Today’s decision by the BoE to maintain interest rates at 5% will come as a blow to those hoping for a cut. But how will it directly impact your mortgage?
For borrowers already locked into a fixed-rate deal, there will be no change as the rate is secure until the mortgage expires.
Meanwhile, borrowers on tracker mortgages which have rates, which run in line with the Bank of England base rate, will also see no change for now. They will no doubt be eagerly awaiting the next MPC meeting on Thursday 7 November.
If you are a homeowner who is coming off a fixed-rate deal and you are looking for a new mortgage in the next six months, today’s decision will be on your radar.
You will, in the last few weeks, have benefited from price cuts as lenders have been reducing rates on fixed-rate deals. Some products for those with high equity are now coming on the market with rates below 4%.
But for those of you who are coming off historically low interest rates, a further cut to interest rates today would have been particularly welcome.
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said: “Borrowers whose cheap fixed-rate deals – taken out before the BoE’s tightening cycle began – are about to expire will face a heavy repayment jump when they refinance.
“Their next big decision centres on whether it is best to lock in another fixed-rate deal, or whether a tracker might work out best over the longer term?
“Whatever option they choose, committing to a new deal is key otherwise they risk reverting to their lender’s ultra-expensive standard variable rate, with the average SVR remaining high at just below the 8% mark.”
For those who are struggling to pay their mortgage, or fear they may face repayment difficulties in the near future, Paul Broadhead offered advice.
“Anyone who is concerned that they may experience financial difficulties in the coming months, should contact their lender as soon as possible, preferably before missing any payments,” he said.
“Lenders have a range of practical, tailored support available to anyone who may be struggling.”
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