Today the Bank of England announced another increase in its base rate. This time by 0.25%, meaning that the base interest rate now stands at 5.25% as of the 3rd of August 2023. The decision came as the UK economy begins to demonstrate some growth and inflation drops to 7.9% from highs of 11.1% in October 2023, and is accompanied by a cautious but optimistic outlook from the Bank’s Monetary Policy Committee.
Highest Base Rate Since February 2008
The move, which marks the largest interest rate increase since the financial crisis began and the first time it has risen above 5% since February 2008, is aimed at curbing inflationary pressures and maintaining the Bank’s commitment to its mandate of price stability. Despite some concerns about the impact of the rate hike on borrowers, the Bank has emphasised that this rate rise is necessary to ensure the sustainable growth of the economy and hopefully bring inflation down to the 2% target that they are aiming for.
Although a lot of people (mortgage professionals at Oportfolio too!) were holding our breath this morning, the decision was not entirely unexpected, as the Bank of England has been gradually shifting towards a tighter monetary policy stance to address surging inflation rates for a long time now. The UK has experienced a period of rapid economic expansion, fuelled by the reopening of businesses after COVID-19 restrictions and strong consumer demand. However, this economic boom has also led to soaring prices and supply chain disruptions, prompting the Bank to act swiftly at the end of 2022.
The Bank of England Monetary Policy Committee
The Bank of England’s Monetary Policy Committee is a committee which meets to decide the official interest rate in the United Kingdom. Their unanimous vote in favour of the rate hike today demonstrated a united agreement in their professional assessment of the economic situation. The rate increase will have various implications for households and businesses across the country. Borrowers with variable rate mortgages and loans which track the Bank of England’s base rate will experience higher monthly payments. However, savers will likely benefit from improved interest rates on their savings accounts, providing them with some relief amid rising prices.
The Bank of England Interest Base Rate Over the Years
Here is a timeline of how the base rate has changed over the last 20 years. Note how the rate dropped to record lows in 2020/2021 and then began to rise as the country came out of the other side of the COVID-19 pandemic. Note also how the base rate increases rapidly from September 2022, after former chancellor Kwasi Kwarteng announced the disastrous ‘mini-budget’ to the house of commons on the 23rd of September.
22nd June 2023: 5.00%
11th May 2023: 4.50%
23rd March 2023: 4.25%
2nd February 2023: 4.00%
15th December 2022: 3.50%
3rd November 2022: 3.00%
22nd September 2022: 2.25%
4th August 2022: 1.75%
16th June 2022: 1.25%
5th May 2022: 1.00%
17th March 2022: 0.75%
3rd February 2022: 0.50%
16th December 2021: 0.25%
19th March 2020: 0.10%
11th March 2020: 0.25%
2nd August 2018: 0.75%
2nd November 2017: 0.50%
4th August 2016: 0.25%
5th March 2009: 0.50%
5th February 2009: 1.00%
8th January 2009: 1.50%
4th December 2008: 2.00%
6th November 2008: 3.00%
8th October 2008: 4.50%
10th April 2008: 5.00%
7th February 2008: 5.25%
6th December 2007: 5.50%
5th July 2007: 5.75%
10th May 2007: 5.50%
11th January 2007: 5.25%
9th November 2006: 5.00%
3rd August 2006: 4.75%
4th August 2005: 4.50%
5th August 2004: 4.75%
10th June 2004: 4.50%
6th May 2004: 4.25%
5th February 2004: 4.00%
6th November 2003: 3.75%
10th July 2003: 3.50%
Speak To a Mortgage Broker
As we have already mentioned, rising interest rates in the country can have a knock on effect on mortgage interest rates and people on tracker mortgages will undoubtedly see a rise in their monthly mortgage payments. If you need to review your mortgage options with a specialist, call or email our team at Oportfolio mortgages today for a free initial mortgage consultation. We are here to help.
