Bank of England base rate guide

• Key points

• What is the Bank of England base rate right now?

• The Bank of England base rate explained

• When will the base rate go up

• Bank of England base rate history

• How the base rate affects mortgages

• Our advice

• The current base rate is 5.25% as of June 2024

• The base rate holding steady for consecutive months suggests interest rates may have reached their peak.

• The Bank of England likely did not decrease the base rate in June 2024 to potentially being seen as politically-led; given the July General Election.

The Bank of England base rate is currently at a high of 5.25% as of June 2024.

The base rate remained at 5.25% since August 2023.

The Bank of England has been gradually increasing the base rate to curb inflation after the coronavirus pandemic, with 14 consecutive rate rises. However, it has held the base rate at 5.25% for last six reviews.

Better.co.uk's Mortgage Lead, Jonathan Bone, had this to say:

“Borrowers have waited three long years for inflation to return to the 2% target. Now that it's finally happened, the excitement has dampened as underlying price pressures in the economy have not slowed as quickly as expected, and the ongoing election likely hasn't helped either. The Bank of England remains obstinate, unwilling to take action despite widespread criticism. Those with mortgages are desperate for relief.

“Many homeowners assumed that hitting the 2% inflation rate would automatically lead to interest rate cuts, making today's base rate decision particularly disappointing. The Bank of England’s inaction has contributed to higher mortgage rates for millions of homeowners who have needed to remortgage this year.

“If you’re due to remortgage soon, be aware that some lenders charge for property valuations. Should you find a better mortgage deal with another lender after interest rates are cut later in the year, you won't get a refund for the original valuation, leaving you out of pocket. Therefore, if you're waiting to see how interest rates change over the next few months, chat with a mortgage broker who can direct you to lenders who offer free valuations."

The base rate increased 14 consecutive times since the end of 2021 by the Bank of England in an attempt to balance out inflation. Since August 2023, it has remained steady - suggesting the anti-inflationary measures are working.

There are 9 members of the Monetary Policy Committee, which decides every 6 weeks if the bank rate should go up, down, or stay the same. Their voting record is public. So if you start to see more members voting for a rate increase, that could mean the base rate will increase soon.

One of the ways the Bank of England tries to control inflation is by increasing the cost of borrowing. If it increases the base rate, the interest rate on credit cards, loans and mortgages usually increases by a similar amount.

Interest rates had been at their lowest in the last few years but, following the pandemic, they have increased dramatically.

2023 has been a tumultuous year for homeowners. We saw remortgage fixed rates surging post the disastrous mini-budget last year and then peaking around 6.16% during August due to base rate hikes. Fortunately, recent positive inflation data means the Bank of England has maintained the base rate at 5.25%, offering a small silver lining for homeowners. 

The combination of declining swap rates and a challenging housing market has incentivised lenders to slash their rates, bringing the average two-year fixed remortgage rate to approximately 5.24% in December 2023.

Precise predictions for 2024 are difficult without a crystal ball because they will depend on inflation trends. Should the current downward trend persist, variable-rate mortgage holders might want to explore fixed-rate options, but it’s important to take all future forecasts with a pinch of salt because multiple factors influence mortgage rates. 

The fact remains that homeowners approaching the end of their fixed deals are going to have to dig deep to cover the higher cost of their mortgage repayments, with the average two-year fixed rate twice what it was this time two years ago. If you don’t think you’re going to be able to afford your mortgage repayments, don’t bury your head in the sand. Speak to your lender as soon as possible. For further guidance, don't hesitate to give us a call.