The Bank of England (BoE) announced on Thursday that interest rates will remain at 0.5%, surprising financial experts who had predicted that the rate would rise to 0.75 %.
The BoE revised its forecast for the growth of the economy as 1.4%, down from a previous forecast of 1.8% in February. The economy grew by only 0.1% in the first quarter of 2018 but the Bank expects that this will increase later in 2018. In March, the inflation rate was 2.5%, which is above the Bank’s target of 2%.
Leaving the interest rate alone does not have implications for the future, so does not rule out an interest rate rise towards the end of the year, the BoE underlined.
Interest rate increases influence the interest rates of both residential and commercial mortgages. Most variable rate mortgages track the interest rate and rise when the BoE raises the rate. Interest rates are set by a team of nine experts that include the governor of the Bank of England, Mark Carney.
The Bank did not comment on the effect that Britain leaving the European Union in March 2019 is likely to have on the economy, but it is expected that Brexit negotiations may have contributed to higher inflation and low economic growth.
Investors applying for commercial mortgages can obtain two- or five-year fixed rate deals that mean their mortgage repayments will not rise if the BoE decides to increase its rates at the end of this year.