You are here: Home - News -

Bank of England holds interest rates at 0.5%

by: Paloma Kubiak
  • 10/05/2018
  • 0
The Bank of England has held rates in May, after the Monetary Policy Committee (MPC) voted by a majority of 7/2 to maintain the base rate at 0.5%.


Just last month, the markets were pricing in a 98% chance of a rate rise but earlier this week, it dropped to just 8% following subdued economic data.

Minutes of the meeting stated: “The preliminary estimate of GDP growth in the first quarter was 0.1%, 0.3 percentage points lower than expected in February. Household consumption growth remains subdued, in line with the modest growth in real income over the forecast period.

“Wage growth and domestic cost pressures are firming gradually, broadly as expected.  The MPC continues to judge that the UK economy has a very limited degree of slack.

“For the majority of members, an increase in Bank Rate was not required at this meeting.  All members agree that any future increases in Bank Rate are likely to be at a gradual pace and to a limited extent.”


Inflation currently stands at 2.5%, above the 2% target, but lower than the peak of 3.1% towards the end of 2017.

The rate is forecast to fall to 2.4% in Q2 2018, to 2.1% in Q2 2019 and to the 2% target by Q2 2020.

The MPC noted that the “most import-intensive components of CPI appear to have peaked” and the impact of past depreciation of sterling on CPI inflation, is “likely to fade a little faster than previously thought”.

It noted: “Taking external and domestic influences together, CPI inflation is projected to fall back slightly more quickly than in February, reaching the target in two years. These projections are conditioned on a gently rising path for Bank Rate over the next three years.

“The Committee’s best collective judgement therefore remains that, were the economy to develop broadly in line with the May Inflation Report projections, an ongoing tightening of monetary policy over the forecast period would be appropriate to return inflation sustainably to its target at a conventional horizon.

“However, that judgement relies on the economic data evolving broadly in line with the Committee’s projections.”

The effect of today’s base rate decision

Kevin Roberts, director, Legal & General Mortgage Club, said the decision is welcome news for borrowers and allows them to continue making the most of these near record low rates.

“Although there is a great deal of speculation about future rises it is important not to get carried away. Any rise should be gradual and it will likely remain a good time for borrowers to assess their current mortgage situation.”


There are 0 Comment(s)

You may also be interested in

Business Skills

In this section, we offer short ‘how to’ guides on harder to crack areas of business. From social media, to regulation or niche product areas, we cover it all.


Our journalists interview key industry entrepreneurs, strategists and commentators for day-to-day market insight and a strategic view of where the industry is heading. We offer lessons for success and explore the opportunities for your business

Success in Practice

Here, we share case studies fleshing out best practice to help you decide what could work for your business. Take a look at how others approached complex tasks like launching a new mortgage lender, advising on a new product area or deciding to specialise in another. Learn from others mistakes and triumphs.


Each week, we ask top mortgage and property commentators with a unique perspective to examine a key news headline, market move or regulatory or political issue.


Vote in our weekly poll here. It’s your chance to tell us what you think and be heard on the top news stories of the week. Review our archive to find out what your industry really thinks and all our coverage of the results.

Top Comments

Be part of the conversation on Mortgage Solutions. We want to hear from you. We have a tool called Disqus to tell us which stories get the most comments each week. Every Friday, the team picks the most thoughtful or opinionated contributions from our readers to enjoy again. Don’t forget to share your favourite stories from the site on social media to keep the conversation going.
Read previous post:
RBS agrees ‘milestone’ £3.6bn US fine over subprime lending

State-backed bank Royal Bank of Scotland (RBS) has been fined £3.6bn ($4.9bn) by US regulators over its subprime lending in...