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The Bank of England has said it should be able to cut interest rates \u201cgradually over time\u201d as it decided to hold borrowing costs at at 5%. <\/p>\n
The decision comes as prices continue to rise slightly faster than the Bank’s target, with inflation remaining at 2.2% last month.<\/p>\n
Bank boss Andrew Bailey said it was “vital” that inflation remains low. “So we need to be careful not to cut too fast or by too much,\u201d he said.<\/p>\n
Experts are predicting the Bank will cut rates further in November.<\/p>\n<\/div>\n
The decision to hold interest rates, which was widely expected, follows a cut from 5.25% in August – the first reduction since the onset of the pandemic in 2020.<\/p>\n
Just one member of the Bank’s nine-member rate-setting committee voted for a cut.<\/p>\n
The base interest rate dictates the rates set by High Street banks and lenders.<\/p>\n
The higher level has meant people are paying more to borrow money for things like mortgages and credit cards, but savers have also received better returns.<\/p>\n
Higher interest rates push mortgage rates up. This can result in landlords raising their rent to cover higher repayments.<\/p>\n<\/div>\n
James and his wife Sofia moved with their one-year-old son to Berkshire after their rent went up by \u00a3100 a month to \u00a31,650 in May 2024.<\/p>\n
They moved to a smaller terraced house where they are paying \u00a31,400. They have a joint income of \u00a354,000 and say they cannot save for a deposit to buy a house.<\/p>\n
Sofia said: \u201cWhen I went on maternity leave, I could only go off for about 10 weeks to spend with my son, because we just couldn’t afford any more. Even that was a major stretch to the point where we had to put ourselves into a bit of debt.\u201d<\/p>\n
She said food banks helped them and sometimes her husband had to work from home as he did not have the money to fuel the car.<\/p>\n
The Bank said the decision to hold this month was \u201cguided by the need to squeeze persistent inflationary pressures\u201d out of the UK economy.<\/p>\n
It expects inflation to rise to around 2.5% towards the end of this year, but it also suggested the country\u2019s economic picture was improving.<\/p>\n
It said it had received reports of a \u201cimproving real incomes\u201d and added mortgage approvals had increased to their highest level since September 2022 \u2013 the month of former Prime Minister Liz Truss\u2019s infamous mini-Budget, which led to soaring mortgage rates.<\/p>\n
But the Bank warned while there was \u201cimproved sentiment and expectations\u201d of increased economic growth, it expected weaker expansion of 0.3% between July and September, down from 0.4%.<\/p>\n
The UK has had sluggish economic growth in recent years, something which the new Labour government has pledged it will change.<\/p>\n<\/div>\n