The Bank of England is expected to hold interest rates at 5.25% for a fourth consecutive meeting next Thursday — which lenders will take a sign to continue cutting mortgage rates.  

The move will come after the Monetary Policy Committee held rates at a 15-year high of 5.25% in November as the central bank bids to bring inflation back under its 2% target, currently at 4%.   

Inflation rose unexpectedly to 4% in the year to December, from 3.9% the month before, its first rise since last February, which at the time dented hopes of an early cut in interest rates by the Bank of England.     

But while analysts at Hargreaves Lansdown say the rise in prices “was above expectations, it wasn’t enough to alter predictions of a rate cut in May”.  

“There’s a chance that one or more of the committee members voting for a rise at the past three MPC meetings may vote to hold this time.   

“There’s even the chance we may see the first of the committee voting for a cut. However, it’s highly unlikely to mean anything other than a hold on rates.”  

Deutsche Bank senior economist Sanjay Raja is even more bullish, predicting that the nine-person committee will vote 9-0 to hold rates.  

The German bank expects 75 basis point cuts this year, followed by a further 150 basis point reductions in 2025  

But Raja adds “a lot will need to go right for spring rate cuts to become a reality, but [this] will ultimately be determined by the weakness in incoming price data”.  

Hargreaves Lansdown head of personal finance Sarah Coles expects competition in the mortgage market to “remain fierce” following next week’s decision.  

Coles says: “Mortgage rates have fallen significantly from a recent peak for the average two-year rate of 6.85% at the start of August 2023, to 5.58%.   

“A major chunk of the drop has taken place over the past month, when average two-year rates fell almost half a percentage point, according to Moneyfacts.  

“December’s bump in inflation dented market confidence about the number of rate cuts that could be on the cards for 2024, and there has been a muted reaction in the mortgage market, most strikingly Santander’s decision raise rates 0.2%.  

“If you have a remortgage looming, or you’re planning to buy, and this has struck fear into your heart, then the good news is that this isn’t expected to be enormously widespread, and the general direction of travel for rates in the coming months is still likely to be downwards.   

“The Santander announcement came sandwiched between cuts from Barclays and Nationwide, so it’s the exception to the rule right now.”