Afin Bank’s CFO comments on the Bank of England’s November base rate

Charles Resnick, our Chief Finance Officer, looks at the Bank of England’s November base rate announcement and considers what it might mean for borrowers and savers.

The Bank of England’s decision to hold the base rate on 6 November came as no surprise.

Following the last update in September when rates were held at 4%, the market was expecting to price in at least one more rate reduction this year.

However, MPC members are now more concerned about the implications of cutting rates too quickly than too slowly, and will likely wait to see the impacts of pay growth and the impact of changes from the Budget before voting to cut rates again.

Mortgage demand has been in decent shape, but it is expected that demand will reduce in line with slowing pay growth, which will put pressure on mortgage affordability.

For savers, maintaining base rates is positive news as it gives them access to savings accounts offering interest rates that go some way to offset the impact of inflation on their finances.

But you can’t escape the shadow of the upcoming Budget looming over the base rate decision.

Following the unusual approach by Chancellor Rachel Reeves to make a “Scene Setter” speech on 4 November ahead of the Budget, tax increases are expected in the statement on 26 November, which would break the government’s manifesto pledges.

What kind of tax rises and who they would impact the most is still unknown, as is any insight into anything else she might announce. As a result, economists and the markets are holding their breath, so a further base rate change in December can’t be ruled out, although it is looking more likely for next year.