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Interest Rates Freeze after 14 Consecutive Rises

Vicky Parry 21st Sep 2023 No Comments

Reading Time: 4 minutes

Contrary to expectations, the Bank of England  have decided to leave UK interest rates at 5.25%. Whilst this is still the highest it has been in 15 years, this is the first sign of any stabilisation we have seen in 14 months.

“Inflation has fallen a lot in recent months, and we think it will continue to do so,” said Bank governor Andrew Bailey.

There were also “increasing signs” that higher rates were starting to hurt the UK economy, the Bank said.

Jason Ferrando, CEO of easyMoney sees this altruistic inference of the actions as negligible:

“Yet another base rate increase may have been viewed as overkill due to the fact that inflation has started to ease in recent months, but it’s fair to say that the job is far from done and so many will argue that a freeze perhaps wasn’t the right path to take today.

We’re yet to see prices actually fall and it’s simply the speed of increase that has reduced. So it would be a shame for the Bank of England to fall asleep at the wheel now, just as they were starting to make some progress.”

For the past 14 months, the Bank has hiked rates in its effort to tame inflation – this has caused an excessive rate of price rises – and while they are still significantly more than usual.

These increases have caused higher payments on mortgages and loans.

Director of Benham and Reeves, Marc von Grundherr, commented: “Today’s freeze will be a small victory for the nation’s homebuyers who have seen the financial goal posts move constantly in recent months. But despite rates remaining unchanged there will still be a real worry for those coming to the end of a fixed rate term, having previously locked in at a relatively affordable rate when they first purchased. 

When their mortgage term does expire, they are likely to find that the cost of their monthly repayments has risen considerably and this is really the last thing anyone wants to contend with, not only with the current cost of living, but with Christmas just around the corner.”

Does this mean we are out of the woods?

It is too soon to say. Further tightening has been not ruled out if inflation remains persistently high.

CEO of MoneyMgapie, Jasmine Birtles, says:

“The Bank of England assures us that inflation will be down to 2% by 2025, or even earlier, but they are been consistently wrong in their predictions for the last few years, so I wouldn’t bet on it!

“It’s quite possible that inflation will come down gradually over the next year or so but there are a lot of imponderables, including the price of oil which is currently near $100 a barrel, the increase in fuel costs, the potential for food prices to go up because of Ukraine and the massive potential for harm of China imploding as it seems to be doing right now. All of these could mean that inflation goes up and interest rates follow.

“It’s a wait-and-see time.”


base rate freeze

Danni Hewson, head of financial analysis at AJ Bell, comments on the latest Bank of England interest rate decision:

“For millions of homeowners who’ve already seen their mortgage payments increase or the half a million facing a hike in the run up to Christmas, today’s decision will be cold comfort.

“Costs have skyrocketed as ultra-low rates were left in the rear-view mirror and though competition is gradually returning to the mortgage market and the number of products available has increased*, those coming off fixed rates are facing a big cost of mortgage shock.

“A £100,000 loan taken out in September 2021 would have cost £443 in monthly repayments. The exact same borrowing today on an average two-year fix comes in at £688 a month.**

“Even factoring in some capital repayment and assuming they could secure the best two-year fix (5.61%), repayments would still be £584 on the £94,012 loan and there are sizeable products fees for that mortgage.

“For mortgage holders who chose not to fix but instead have endured the punishing standard variable rate which topped a record breaking 8.09% at the start of September, there is hope that locking into a new fix could start to look more attractive following today’s decision

“Markets think the peak has been reached with over 70% anticipating another hold at the next meeting in November. But anyone hoping that the base rate will make a swift return from whence it came is going to be sorely disappointed, as rates are expected to remain high for some time to come.”


There has been better news for savers as under pressure banks have begun offering competitive options:

  • Best easy access account: 5.10%
  • Best one year fixed rate bond: 6.2% (NS&I)
  • Best notice accounts: 5.35% (90 days’ notice)
  • By comparison, at the start of December 2021 the top easy access account was 0.75% and came with some catches regarding withdrawals*

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Jasmine Birtles

Your money-making expert. Financial journalist, TV and radio personality.

Jasmine Birtles

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