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Bank of England keeps base rate at 5.25%: when will interest rates drop?
Committee votes 7 to 2 to keep interest rates at 16-year high
The Bank of England has again voted to maintain the base rate at 5.25%.
It's the seventh time in a row that the Bank's Monetary Policy Committee has opted to keep the base rate unchanged. Before this, there had been almost two years of consecutive hikes.
Here, Which? explains what today's announcement means for mortgages and savings, and considers when the rate might finally begin to fall.
June's base rate decision
The Bank of England's Monetary Policy Committee has voted by a majority of 7 to 2 to keep the base rate at 5.25%.
Two members voted to cut the rate by 0.25 percentage points, to 5%.
The decision was widely expected, with financial experts anticipating interest rates wouldn't be cut until later this year.
- Find out more: how the base rate works
When will the base rate fall?
The Bank's remit is to maintain inflation at a rate of 2%, and the base rate is a key mechanism in achieving this.
Yesterday, it was revealed that inflation hit the 2% target in May, falling from 2.3% in April.
While this is good news, it is the first time since July 2021 that inflation has been at the target level, and the Bank believes it is too early to cut the base rate.
In its announcement, the Bank stated that 'monetary policy will need to remain restrictive for sufficiently long to return inflation to 2% sustainably in the medium term.'
On course for a cut
The base rate will next be reviewed on 1 August, and there are some hopes a reduction could be on the way.
Matt Smith of the property portal Rightmove says: 'While the base rate hasn't dropped today, yesterday's positive inflation figure has kept us on course for a first cut in August.
'While many will have hoped for a surprise cut, a hold was expected by the market – and this certainty could still lead to mortgage rates trickling down rather than up over the next few weeks.'
- Find out more: what's happening to inflation?
How does the base rate freeze impact my mortgage?
Today's announcement will be frustrating for mortgage holders and home buyers who were hoping that interest rates would drop.
If you're on a variable rate deal linked to the base rate, your mortgage repayments will remain the same.
If you're due to remortgage from your fixed-rate deal soon, you'll need to keep your fingers crossed that the rate will be cut when it is next reviewed.
Since the last base rate decision in May, mortgage rates have risen slightly.
- Find out more: best mortgage rates 2024
What if I can't afford my mortgage?
By entering your details into our mortgage repayment calculator, you'll be able to see how your current payments could change if you had to pay a higher rate.
Our guide on what to do if you can't pay your mortgage outlines what support might be available if you're struggling to meet your monthly bill.
What does the base rate freeze mean for savings?
In theory, the base rate freeze should see interest rates on savings accounts remain steady. However, providers could start to factor in potential falls in future and start lowering rates.
Excluding accounts with limited withdrawals or other restrictions, the best instant-access savings rate is currently 5.2%
The top one-year cash Isas offer rates of around 4.9%.
- Find out more: best savings accounts
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