The Bank of England (BoE) decided not to make the first cut to UK interest rates in more than seven years today.
Having remained at a record low of 0.5% for more than seven years, the consensus was until recently that the Bank would increase interest rates. But the UK’s decision to exit the EU last month and a slowing UK economy left some policymakers contemplating a cut to the base rate to a record low of 0.25% in an attempt to improve confidence in the UK economy.
The FTSE 100 and FTSE 250 were both higher this morning in anticipation of the rate cut - a factor that also boosted sentiment on major indices in mainland Europe.
Confirmation that the Bank of England has today announced that interest rates will continue to remain frozen at 0.5% should act as a reminder that the cost of money, especially for homebuyers, is at a record low, according to CEO of hybrid estate agent eMoov.co.uk, Russell Quirk.
He commented: “The UK economy and the property market, in particular, are now awakening from the apparent Brexit limbo it has been stuck in over the last few weeks.
“The UK property market is still fighting fit, despite the negative sentiment it has been plastered with by Brexit doomsayers and, with mortgage rates also certain to remain low, now is the perfect environment for UK property if there ever was one.”
But a reduction in interest rates would have reduced many mortgage holders’ monthly bills, depending on whether their deal is directly tied to the base rate.
Those on a 'tracker' mortgage would have benefited immediately, because the tracker mortgage repayments would have fallen in line with the drop in interest rates.
However, a cut in interest rates would not necessarily have been passed on in full by mortgage providers. In fact, it has been suggested that some lenders may even sustain existing borrowing rates, or increase pricing in the near term to regain recent months’ lost margins.
But despite the bank's decision to keep rates on hold, the outlook for savers will continue to look bleak, with the average easy access savings account now paying just 0.56% interest.