How will the new Bank of England base rate decision affect me?

In November 2023, there will be a meeting to decide the new base rate by the Bank of England. 

The Bank of England’s Base rate is the most important interest rate in the UK as it determines the interest rate. The Bank of England’s Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target in a way that helps to sustain growth and employment. 

The base rate has been on the rise since the pandemic in 2021 when it hit its all-time low of 0.1%. Before the pandemic, the Bank of England’s base rate had been slowly climbing, reaching 0.5% in November 2017 and to 0.75% in August 2018.

At the meeting on the 1st of November 2023, the MPC voted by a majority of 6–3 to maintain the Base Rate at 5.25%.

These levels were last seen before the 2008 financial crisis, where following it the Bank of England gradually cut the base rate from 5.5% down to 0.5%, where it stayed for many years. 

In the past, the base rate was set by the Chancellor of the Exchequer but the current system was set up under Gordon Brown. The Monetary Policy Committee chaired by the governor of the Bank of England, has the power to set rates based on inflation targets. 

Historically, mortgage rates tend to follow the base rate, with the average mortgage rate being around 2% higher than the base rate. 

Britain’s base rate is now almost one per cent higher than European countries like Germany and France, and only 0.25 per cent behind America’s booming economy. 

The cost of delaying buying property can be more detrimental than accepting a higher rate now. 

Buying off-plan property could be advantageous in delaying the requirement for a mortgage until rates have come down. 

Official Bank Rate

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