interest rates BoE interest rate rise bank of england

Interest rates held again two years after BoE began hikes

The Bank of England has just announced it is once again holding interest rates at 5.25%, with most analysts now expecting a series of rate falls in 2024.

Falling inflation levels in the UK led to the Bank of England halting its rising interest rates, after 14 consecutive hikes since December 2021. Now for the third time, the Bank has kept rates the same at 5.25%, in a bid to continue the drive towards a target inflation rate of 2%.

Lenders had already begun to bring their rates down ahead of the latest interest rates announcement, though, due to more favourable swap rates boosting confidence in the market. So while borrowers remortgaging now will be facing higher payments than a couple of years ago, the situation is improving.

Today’s news has sparked a positive reaction in the stock market, too, with confidence growing in the likes of the FTSE 100 index and the FTSE 250 which Marc Ashdown, BBC business correspondents, marks as a sign of a “brighter year ahead”.

The link between mortgages and interest rates

As we have seen in recent months, the moves of mortgage lenders do not always directly reflect central interest rates, although tracker rates and standard variable mortgage rates are more immediately and directly affected. But in the fixed rate space, products have been getting cheaper since the summer.

Ahead of this latest Bank of England announcement, there were reports of even more lenders adding cheaper fixed rate products to their books, likely reflecting the fact that there are no more hikes to interest rates on the horizon if the economy continues on the same course.

Rising mortgage rates have certainly had a knock-on effect to the housing market over the past couple of years, reducing affordability for some new buyers and borrowers, who are also up against the rising cost of living. That being said, the market has remained resilient overall, with strong appetite and stable pricing on average.

Kellie Steed, mortgage expert, points out that most analysts are expecting mortgage rates to continue to decrease over the coming year, easing pressure on buyers and borrowers.

“In the past 2 years since then, the average two-year fix rose from 2.34% to 6.04% and average five-year fix from 2.64% to 5.65%, largely as a result of these base rate increases. The average SVR (standard variable rate) is currently 8.19%, almost double the 4.40% it sat at in December 2021.

“The majority of economists expect that we’ll see mortgage rates continue to fall next year as average swap rates have now fallen for five months in a row. Some even expect a 1 percent total cut in the base rate, with suggestions the base rate will fall as low as 4.25% by the end of 2024.

“Ahead of the base rate announcement, lenders continued to cut fixed rates, which shows that this interest rates announcement was also anticipated.”

Positive momentum for 2024

Also commenting on today’s interest rates announcement, Rachel Springall, finance expert at, said: “The past two years have proven to be an unprecedented period of interest rate volatility for mortgages.

“Those coming off a fixed rate deal and wishing to fix once more will likely have to cover a much higher mortgage repayment, with the average two-year fixed rate more than double what it was in December 2021.”

She added that the ongoing cost of living crisis affecting the UK – and many other parts of the world – could impact first-time buyers the most. Borrowers who are facing difficulties in keeping up with their mortgage repayments are advised to seek help and work with their lender.

“Borrowers hoping to lock into a fixed rate mortgage for peace of mind may be sitting on the fence as they wait for rates to fall further in the weeks ahead. However, any significant rate cut activity would typically be linked to a volatile swap rate market.

“The past few months have shown positive signs for mortgage pricing, so it is hoped that the fixed rate cut momentum continues into 2024. The incentive to switch from a variable rate is evident, with the average Standard Variable Rate (SVR) resting above 8%. A typical mortgage being charged the current average SVR of 8.19% would be paying around £275 more per month, compared to a typical two-year fixed rate (6.04%).”

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