The Bank of England is expected to maintain current interest rates on Thursday as it waits for clearer indications that inflation risks are under control. Instead, attention will shift to decisions regarding bond sales, which may influence Finance Minister Rachel Reeves’ upcoming first budget. While British inflation remained stable in August, it accelerated in the crucial services sector, leading analysts to anticipate a slower decline in interest rates compared to the United States and the euro zone.

Experts' Reactions:

Andy Mielczarek, CEO of Chetwood Financial, said: “The Bank of England’s decision comes as no surprise and reinforces the sentiment that a period of economic stability is best for Britons. With inflation holding steady, it’s important that the central bank lead by calm and confident example to the public, and it has done precisely that. 

“Whilst existing mortgage holders would have liked to have seen a further reduction, they can remain optimistic that the borrowing environment will be less temperamental and that they can make confident longer-term financial decisions. New customers can be hopeful that this period of stability continues, and that a more beneficial mortgage outlook can make their investment decisions more attractive. 

“For the time being, savers will be happy the rate has remained the same but could be forgiven for thinking it may be the last chance to maximise returns, especially on fixed-rate savings products. They must remain diligent in searching the market for the best returns before a potential further reduction to the base rate.” 

Jatin Ondhia, CEO of Shojin, said: “Sticky inflationary pressures have prompted the Bank of England to maintain their conservative approach. While the focus on economic stability is understandable, today’s decision will surprise many who feel it is time to continue the downward trend and lower the base rate in order to revitalise growth opportunities.

“Within the property sector, homeowners and developers have had to deal with the double sting of the high inflationary-high interest environment, with the former having faced higher mortgage rates than at any point since the financial crisis and the latter finding it harder to access much-needed finance.

“With that said, this is still an important moment for investors to reassess their portfolios as base rate cuts are likely to appear again later in the year. Real estate continues to present strong potential, while alternative investments could also offer valuable opportunities to diversify and tap into fresh avenues for growth.”

Paresh Raja, CEO of Market Financial Solutions, said: “The underlying data in yesterday’s CPI figures dashed any hopes for a rate cut today, but this decision presents an opportunity for investors to prepare for a likely surge in market activity. Indeed, the decision comes as house prices continue to rise, and with economists forecasting that the BoE will cut the base rate at the next meeting, we expect demand to experience an uptick in Q4.

“With this in mind, property investors and their brokers should use the next month to consolidate their portfolios and ensure that they have a robust strategy in place to help them capitalise on any opportunities that a more relaxed monetary environment could create. The ability to move at pace will be crucial as activity picks up, so having the right financial tools to hand will be of the utmost importance as well.

“On this front, lenders also have a vital role to play, and it’s essential that their product offerings are ready to meet the evolving needs of investors and a potential surge in demand. In doing so, they can contribute to sustaining the market’s recovery after what has been a challenging few years.”

Ben Nichols, Managing Director at RAW Capital Partners, said: “Yesterday’s inflation print all but confirmed today’s decision, though the markets had been expecting it for some time. With core and services inflation both applying pressure in August’s CPI, policymakers clearly want to see a sustained downward trend in the underlying figures before opening the door to a more aggressive rate-cutting cycle.

“Today’s rate hold, therefore, may seem like something of a setback, particularly for property buyers and borrowers, but it should have a consolidating effect that will provide greater market and economic stability in the medium to long term. We can probably expect at least one further rate cut before year-end, which should provide a boost to investor sentiment. In light of this, we expect numerous opportunities to arise in the coming weeks and months, especially for investors who diversify their portfolios to meet the ever-changing nature of the markets.

“Indeed, while the BoE is holding rates, the ECB is cutting them, and the Federal Reserve is following suit. As such, we could see some fluctuations in the markets as the major banks relax their monetary environments at different paces and to different degrees. So, investors could look to alternative investments like real estate, private debt and other non-traditional assets to ensure that their portfolios remain robust in the face of any potential volatility.”

Alastair Douglas, CEO of TotallyMoney comments: Inflation is proving to be stubbornly persistent. And while the Bank of England and the previous government celebrated their success of halving it by last Christmas — it’s not halved again since, which means it remains above the 2% target, and is expected to increase before the New Year. There’s still hope of a base rate reduction before the end of 2023, and some banks are already making changes which will impact both borrowers and savers. Competition in the mortgage market is warming up, and you can find rates as low as 3.77%. But the headline numbers aren’t always what they may seem, and these offers can come with low loan to value ratios, and hefty product fees. If your current deal has ended, or is coming to an end, make sure you check your bank's standard variable rate. These can be as high as 8.99% — which is well above the base rate, and will add a considerable amount to your monthly payment. For savers, you can still find interest rates as high as 4.80% — which can earn an additional £550 per year when compared to the big high street banks. So it’s important to shop around, and move your money if you’re not getting a fair deal. And with the Financial Services Compensation Scheme, your savings are protected up to £85,000 if the bank, building society or credit union goes out of business. But you should always read the small print, as some might impose a maximum annual withdrawal allowances, or minimum deposit values.”

John Dentry, Product Owner of the Current Account Switch Service at Pay.UK, said:

While this may stabilise falling rates on savings accounts, banks are still having to find new ways to compete for customers. This is why we’re seeing some of the highest switching levels ever recorded, often processing over 100,000 switches* a month.  

Whether it’s popular cash incentive deals, better customer service and mobile apps, or simply free tickets to the cinema, banks are working hard to attract customers in a reduced interest rate environment. However, to take advantage of these deals, consumers must be willing to switch.”

“This underscores the importance for both individuals and businesses to find the right banking partner. While you should stay with a bank that serves your needs, if you feel like it might not be quite right, have a look around to see if there’s a better deal out there for you.”