With 2023 drawing to a close, the Bank of England's Monetary Policy Committee (MPC) has voted to maintain the base rate at 5.25% by a majority of 6-3.
Yesterday's (14 December) decision marks the third time in a row that the Bank's base rate has stayed at this level, following 14 consecutive rises between December 2021 and August 2023.
The Bank bases its monetary policy on economic and inflationary pressures, using interest rate hikes as a tool to combat rapidly rising costs. Higher interest rates make borrowing more expensive and saving more rewarding, which can help reduce how much is spent across the UK.
According to Rachel Springall, finance expert at Moneyfacts, the past two years of continuous interest rate hikes have led to 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."
In contrast, Springall noted that some may be disappointed by the Bank's decision to maintain the base rate, as previous rate increases led to "much better returns" for savers.
With inflation still higher than the Bank's 2% target, future interest rate hikes could still be on the horizon next year.
The MPC will meet for their next bank rate decision on 1 February 2024.
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