Bank of England expected to keep interest rates unchanged next week – what it means for your money

MILLIONS of households could breathe another sigh of relief as interest rates are expected to remain unchanged next week.

Decision-makers on the Bank’s Monetary Policy Committee (MPC) are expected to keep interest rates at 5.25% for the fifth consecutive.

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The MPC will meet during the week to decide if the economy is showing the signs it wants to see before starting to cut rates.

But economists say that as things look now, only one of the nine-person committee will likely think that conditions are right for a cut.

The Bank has signalled at recent meetings that cuts are likely to come in future after rates have either been hiked or kept unchanged at every meeting for the last four years.

When the group met in February, only one of them, Swati Dhingra, voted to cut rates.

Two voted for a rise, but the rest said they should stay at 5.25%.

Robert Wood, chief UK economist at Pantheon Macroeconomics, said he expects the same vote this time.

Mr Wood said: “The MPC focuses on the ‘tightness of labour market conditions, wage growth and services price inflation‘ to judge ‘how long Bank Rate should be maintained at its current level'”.

“We think the data have not surprised enough to trigger a change in guidance at the MPC’s meeting on March 21.

“The Bank will continue signalling rate cuts, but with little new as regards to timing.

“We expect the same 1-6-2 (cut-hold-hike) vote as last month,” he said.

Since that last meeting, gross domestic product (GDP) data for December showed that the UK’s economy contracted 0.3%, pushing it into a recession.

That was worse than the 0.0% move that the MPC had expected.

Both unemployment and Consumer Prices Index inflation have also been lower than the MPC expected in its February forecast.

Figures from the Office for National Statistics (ONS) showed that the annual rate of price rise stayed at 4% in January.

Mr Wood said: “Overall, the data since the MPC’s last meeting confirm – rather than challenge – its forecasts.

“That is all that is needed for the BoE to remain on course for summer rate cuts.

“In February, the MPC forecast inflation would fall to 1.4% at the two-year forecast horizon if it kept interest rates restrictive at 5.25%. Policymakers just need the confidence to trust those forecasts.”

On Wednesday new Consumer Prices Index inflation figures for February will be released by the Office for National Statistics.

The Bank will have these figures before making its decision.

What a rate pause means for your money

Below we reveal more about what a rate pause could mean for your money.

Mortgages

Usually, if rates rise it means that mortgage bills, depending on the type you have, will increase.

Those on a fixed-rate deal tend to be safe for now until they remortgage.

But other mortgages, such as a tracker or standard variable rate (SVR) mortgage, can be impacted straight away.

Homeowners on variable-rate mortgages might not see their repayments go up straight away, but they likely increase shortly after interest rates are hiked.

But the exact amount depends on your borrowing and your loan-to-value.

However, if the BoE opts to freeze current rates, your lender may opt to do nothing at all.

This will come as a huge relief to those who have faced 14 consecutive increases to their mortgage bill.

Either way, your bank should warn you of any increase to your rate before it goes up.

We’ve got more info on how to find the best mortgage rate deal here.

Credit card and loan rates

Again the cost of borrowing through loans, credit cards and overdrafts can go up if the base rate is hiked, as banks are likely to pass on the increased rate.

Certain loans you already have like a personal loan or car financing will usually stay the same anyway, as you’ve already agreed on the rate.

But rates for any future loan could be higher, and lenders could increase the rate on credit cards and overdrafts – although they must let you know beforehand.

If rate hikes are paused again nothing is likely to change.

However, you can still cancel a credit card if you want and will have 60 days to pay off any outstanding balance.

Savings rates

Savers are the main group to have actually benefited after the last 14 rate rises.

That’s because banks tend to battle it out by offering market-leading interest rates.

Although banks are usually much slower to act than with passing on higher rates for borrowing.

Of course, if the base rate doesn’t increase, banks will likely take advantage and keep their rates the same too.

Anyone currently getting a low rate on easy-access savings could find it’s worth looking around for a better rate and moving their money.

This post first appeared on thesun.co.uk