Bank of England Base Rate Announcement: September 2024

You might’ve heard the recent news that the Bank of England has voted to hold the base rate at 5% for another few months.  

So, let’s recap. The base rate dipped very low during Covid – below 1%. Then it rose sharply between 2021 and 2023, where it hit 5.25%. This rate held for a long time – a whole year in fact – before it finally dropped down to 5% in August this year, where it’s staying, at least for now.  

So what does that mean for you? We break it down with 5 simple questions. Let’s go! 

What happened with interest rates today?  

The Bank of England voted today that interest rates will remain at 5% - at least until the next review in November. Beforehand, the rate had stayed at 5.25% for a long time. So, there are a few things you could take from them voting to keep the base rate as it is.  

Why did the rate stay the same?  

Interest rates are reviewed eight times a year, moving up and down (or staying the same!) to help control inflation in the UK.  

Rates tend to rise to try and combat inflation. Higher rates encourage people to spend less, with the aim of lowering demand and bringing inflation down.  

A lower rate encourages people to spend their cash to help the economy grow. So, whilst the drop in rates since August indicates that inflation is under control, it seems they don’t want to be too hasty in lowering it further, for now.  

What does it mean for the housing market?  

It depends. In general, if there are higher rates, people borrowing money to buy a house will end up paying more for their mortgage, as the cost of borrowing is passed on. This scenario can mean fewer people are looking to buy houses, meaning the price of homes could drop.   

Although the rate held today, the recent decrease could be encouraging for new buyers, as mortgages will likely become more affordable. This could mean more buyers enter the market, increasing demand, and perhaps prices too. There are a lot of other factors that impact house prices though, so we'll have to wait and see. 

Check out our full breakdown of the housing market in our Autumn analysis here. 

What does the change mean for my mortgage?  

Well this time around, there was no change. If you’re on a fixed rate mortgage, that means there won’t be any immediate change. Your rate will stay the same until your fixed term ends either way.  

If you’re on a tracker mortgage or a standard variable rate (SVR), you could see an immediate change, as the monthly cost tends to move in line with the Bank of England base rate. As the rate didn’t change though, you might not see too much movement. And remember, these types of mortgages usually have a minimum rate, and this is generally set at the amount you were paying at the start of the deal.  

The recent drop in rates is good news for first-time buyers, but for people looking to remortgage, rates are still much higher than they were 2-5 years ago. If your rate is expiring soon, it could be good to talk to a lender or a broker — because the standard variable rate may be a lot more than what you're on now. 

What happens next time?   

The general consensus for a while has been that rates are set to drop this year – with many experts predicting a second drop in 2024. So, although it didn’t happen today, that doesn’t mean it won’t happen at all this year – the Bank of England’s Monetary Policy Committee will review the rate two more times in 2024. The prime minister recently hinted at a gloomy October budget though, so it seems like things could still go either way in the November review. 

Of course, nothing’s set in stone. We’ll keep you updated if anything does change. In the meantime, feel free to reach out – we’re here if you need us.