When is the next Bank of England interest rate decision? Review date, forecast, how base rate alters mortgages

The eyes of economists, businesses, and families will soon be turning to the Bank of England's next interest rate decision, which is due in just a few weeks' time.

Mortgage holders were offered a rare moment of relief after the last meeting in September, when the Bank chose to keep interest rates on hold for the first time in two years. Members of the Monetary Policy Committee (MPC) voted by a narrow majority to hold its key rate at 5.25% - which is already the highest level since the 2008 financial crisis, but finally brought an end to the Bank's 14 consecutive rises since the end of 2021.

It came after official figures revealed a surprise decline in inflation in August, with the annual rate falling from 6.8% to 6.7%. This prompted hopes that the tide had perhaps begun to turn in relation to the country's economy, and was a key contributing factor to the Bank of England's unexpected decision.

Governor Andrew Bailey said: "Inflation has fallen a lot in recent months, and we think it will continue to do so. That is welcome news. But there is no room for complacency. We need to be sure inflation returns to normal and we will continue to take the decisions necessary to do just that.”

However, despite the small reprieve for people in September, interest rates – and therefore mortgage and savings rates – remain historically high, and the cost of living crisis continues to place pressure on households. This means that the Bank of England's next decision will be equally as important for people, and will still have an impact on how much of a struggle it is to afford bills and necessities.

So, what will the Bank's MPC decide to do with it next meets? Will its economists continue to keep rates where they are and risk a resurgence in inflation, or will they return to their streak of hiking rates and risk a recession? And perhaps most importantly for most people, when will we find out what they decide to do?

What are interest rates?

Interest rates, as we know them in our daily lives, are extra bits of money we pay on top of a loan or receive back on our savings. They are there to maintain the value of the money being loaned or saved. In the case of loans, interest may also cover any risk the borrower presents to the lender.

But the Bank of England’s interest rate - also known as the base rate - is a little different. The UK central bank uses the mechanism to preserve the value of the pound - something inflation erodes. Given it is the source of all the pounds in the economy, when it ups its rate, it essentially makes it more expensive to get hold of money.

The effects of its decision then trickle down from banks to businesses and consumers over a period of several months. You will see it reflected in higher interest rates for loans, debts, or savings accounts - although there has been some controversy over the speed at which high street banks have been passing better savings rates on to customers.

Mortgages are influenced by the Bank of England’s base rate - particularly variable rate home loans, like trackers, which can go up, down or stay the same depending on each central bank decision. However, fixed rate mortgages - which most households are on - are also influenced by several other factors, including swap rates. It is why most mortgages don’t track the Bank rate all that closely.

At present, the UK’s interest rate is set at 5.25%. The last time it was this high was in April 2008, when the country was in the middle of a severe recession prompted by the banking crisis.

Another recession could be on the way later this year as a result of interest rates, with the latest S&P Global/CIPS flash UK purchasing managers’ index (PMI) - an indicator of private sector growth - showing higher borrowing costs have pushed the sector into a contraction. If this scenario happened, it would mean Rishi Sunak would have failed to deliver his pledge to grow the economy in 2023.

When is next Bank of England rates decision?

The MPC meets eight times a year to vote on how interest rates should be set. Its nine members are either Bank of England employees (including the governor Andrew Bailey) or independent economists, with the split working out at 5:4 between the two camps. A Treasury official also attends, but is not allowed to vote as the Bank is nominally independent of the government.

Their meetings tend to take place on a Wednesday with the decision then announced to the nation at midday on the following day. We will next hear from them on Thursday 2 November, and once more before the end of the year on Thursday 14 December.

Will interest rates go up again?

Since the Bank of England decided to keep interest rates at the same level in September, many are hoping the same will happen again - arguing the decision was a sign the Bank had reached its peak interest rate.

Grocery inflation also dropped again recently, with the price of supermarket staples such as butter falling in price over the past year. Costs still remain stubbornly high and continue to be a struggle for households, but this is a sign of inflation still being on the decline, which is something the Bank will take into consideration.

It's also worth noting that the Bank of England's chief economist Huw Pill - who attracted negative headlines earlier this year for his remarks about the cost of living crisis - recently warned the Bank against doing "too much" and hiking rates again, arguing it could inflict “unnecessary damage on employment and growth”.

However, anyone hoping that this could mean interest rates may soon be on their way down is likely to be disappointed. According to experts at The Times Money Mentor, it is unlikely the Bank will lower the base interest rate until inflation comes down significantly from its current level of 6.7%. This is because it doesn’t want to encourage a greater level of spending and risk inflation spiralling even further.

Reflecting this, Governor Bailey warned that we should not expect interest rates to fall until there is “solid evidence” that inflation is slowing.

However, rates being as high as they are is unsustainable. As people struggle amidst the cost of living crisis, they spend less - which leads to negative economic growth and causes fears of a recession to mount.

Therefore, the Bank will want to bring interest rates down when inflation makes this possible - although it is unclear when this will be. The Bank of England has said that it expects inflation to continue to drop significantly throughout the remainder of 2023, though, so perhaps the shift will happen sooner than we once expected.