When will UK interest rates go down?

In November, the Bank of England chose to keep the base interest rate at 5.25%. Prior to this, the UK has witnessed a gradual increase in interest rates, prompting concerns and speculations among economists and the public. Good news for those with savings, but mortgage rates are now extremely high, with homeowners asking when UK interest rates will go down.

Image credit

Why hold the Base Rate at 5.25%?

The recent decision to maintain the base interest rate at 5.25% reflects a cautious approach driven by the Bank of England to curb inflationary pressures and maintain economic stability. Rising inflation, fuelled by various factors such as the war in the Ukraine and the cost-of-living crisis has prompted the bank to reassess its monetary policy, weighing up the impact of higher interest rates on economic growth.

Falling interest rates?

Predicting the timing of an interest rate decrease is challenging and, unfortunately, nobody knows for sure. In the meantime, those who wish to buy property before the rates increase again are opting for a home buyers survey when purchasing. More information can be found from specialists such as https://www.samconveyancing.co.uk/homebuyers-survey.

Higher interest rates vs inflation

Higher interest rates make borrowing more expensive. This in turn reduces business and customer spending, in theory making us “spend less and save more”.

Raised interest rates and their impact on inflation

The effectiveness of interest rate adjustments in taming inflation depends on various factors, such as the overall health of the economy and the root causes of inflation.

Image credit

It is also influenced by supply challenges. Post-Covid lockdowns heightened demand and surpassed supply capabilities. The Russia/Ukraine invasion elevated energy and grain prices, escalating energy bills and food expenses. Vegetable shortages from unpredictable weather and poor harvests added further strain, along with import issues caused by Brexit.

Joseph Brown

Joseph Brown