Interest rates hold at 4.75% – consumer credit industry reaction

The Bank of England has decided to maintain interest rates at 4.75% following a split vote among its Monetary Policy Committee (MPC).

While six members opted to keep rates unchanged, three advocated for a 0.25 percentage point cut due to concerns over stagnating economic growth. The MPC’s new projections indicate zero GDP growth for the last quarter of 2024, a downgrade from previous forecasts. The Bank said changes to employment costs in the Budget had created significant uncertainty in the economy. 

Melanie Spencer, Sales and Growth Lead at Target Group, said “A hold was always the expected outcome of this latest meeting, especially given the recent news on inflation. While the uncertain outlook for inflation will remain a worry for the Bank of England, the overriding feeling is that we will still see a return to cuts in 2025.

“It will be interesting to see how swap rates react to this stability and whether it provides lenders with the scope to make even small changes to pricing. We have seen some movement in recent weeks as swaps continue to stabilise post-Budget and the hope for many is that this trend will continue into Q1, with a potential cut in February’s meeting.

“With the change to stamp duty relief coming at the end of Q1, this is likely to encourage activity in the early part of the year – although with transaction times as they are, it is likely that many will have already missed the boat. However, with consumer demand expected to increase as rates and market conditions improve, there’s no question that technology adoption and integration will need to play a key role – whether that’s driving efficiencies in application and decision-making, or bringing product or criteria innovations that help answer the demands of the market.”

Paul Noble, CEO of Chetwood Bank, said “Today’s announcement comes as no surprise following yesterday’s rise and general inflation uncertainty after October’s Budget.

“However, while it might not be the cut some suggested, the Bank of England once again provides a sense of confidence. This renewed stability reinforces the notion that now’s a good time for people to consider their savings options and secure the best rates available, especially if the predictions of rate cuts in the future are correct.

“For consumers, it’s important to stay proactive, ensuring that any hard-earned money works as hard as possible in products that suit their needs. As we enter 2025, savers must align their savings strategy with their financial goals for the new year.”

Simon Webb, Managing Director of capital markets and finance at LiveMore said “No third time lucky this month for borrowers on SVRs, trackers or first-time-buyers hoping for a reduction in the Bank Rate again. After the increased borrowing announced in the Autumn Budget that set markets in a flurry, and November’s repeated rise in inflation, it’s no surprise that the MPC voted against a base rate drop – for now at least.

“There are many thousands of borrowers aged 50 to 90 plus whose interest-only mortgages have expired – or are about to. They’re finding themselves trapped, paying their lenders’ higher standard variable rates, when in fact they often do not need to.”

Ben Allkins, Head of Mortgages and Protection at Just Mortgages, said “It’s safe to say today’s decision was widely expected and I think even the most avid supporter for rate cuts would say it’s probably the right call. The positive to take is that the path of interest rates in 2025 is still set to move downwards. Of course the central bank will have to carefully balance the uptick in inflation with an economy showing signs of stress. That’s without considering the potential of any external shocks too.

“Speaking with our brokers and the lenders we work with, the general consensus for 2025 is positive. There’s no doubt that clear challenges will absolutely remain, particularly around affordability. At least a hold on the base rate brings some stability which is always well received by the markets and by swap rates. This may give lenders some leeway to make movements as they look to build their pipeline heading into the new year.

“Brokers will continue to play a fundamental role in helping clients navigate a challenging and ever-changing market. As a result, they need to have a clear presence in their local market, educating clients and highlighting the opportunities that are still available.”

Susannah Streeter Head of Money and Markets at Hargreaves Lansdown said “There’s a chill spreading just before Christmas, with interest rate cuts on ice, and cold water being thrown on hopes for a rapid reduction in rates next year. The decision to keep rates on hold had been widely predicted, given that inflation has veered further away from target, but it did little to calm the jittery sentiment on the markets. The FTSE 100 stayed deep in the red, while the pound started to slide again against the dollar, trading at $1.26.

“The door is still open to cuts however, as this was not a unanimous decision, with three members of the committee voting for another 0.25% rate cut. However, they are expected to be fewer and far between next year, with the markets pricing in just two interest rate cuts.

“The Bank of England is ringing in the same discordant notes of caution as the Federal Reserve. The Fed’s guidance yesterday of just two further interest rate cuts next year sparked nervousness and a wave of sell-offs, and the Bank’s decision has done little to provide much cheer. We are seeing tighter scrooge like policy returning from central banks, who remain cautious about inflationary risks ahead – fresh tariffs from Trump are looming and in the UK the effects of the Budget changes on prices still hard to calculate. Nevertheless, with the UK economy contracting, and inflation still more likely than not to head back down towards target next year, we’re still on the rate-cutting track but the inclement economic weather means we are on go-slow. This could be good news for savers and those looking for an annuity, but bad news for mortgage borrowers.”

Sarah Coles, Head of Personal Finance at Hargreaves Lansdown said “The Monetary Policy Committee effectively shut up shop early for Christmas, keeping rates on hold, and the market is expecting the shutters to remain firmly closed to rate cuts for longer in 2025 too.

“Things don’t move in a tremendous hurry in the easy access savings market, so we’re still seeing the impact of last month’s rate cut feed through into very gradual reductions in a number of accounts. The repricing within the markets in recent days may halt the cuts for a while, and we’ve also seen the reappearance of one account offering 5%. However, overall, rates are still on their way down.

“Fixed rates are likely to be more responsive, and we’ve already seen them start to creep up as banks price in expectations of rates staying higher for longer. There should be some fairly interesting deals on offer in the coming days, so anyone with money they want to fix for a period, should consider taking advantage while they can. It’s worth checking online banks and savings platforms, where rates tend to be much more competitive than the high street giants.

“There’s a double-blow for those on tracker rates – who won’t see their monthly payments drop in December, and can expect to wait longer in 2025 before rate cuts materialise too. There will be those who switched to a tracker at the start of 2024, who will have expected a raft of rate cuts by now, so the idea of just two in 2024 and as little as two in 2025 will be a major disappointment.”