Base rate hold ‘will pave way for mortgage lenders to cut rates in weeks ahead’

Maike Currie, vice president of personal finance at PensionBee, said: “Today’s decision was never really about what the Bank of England did, but what it said next.

“Investors were listening closely for any clues about the future path of interest rates and how concerned policymakers are becoming about the weakening labour market.

“The 7–2 split also tells an important story. While the majority believe a cooling labour market and sluggish economy should gradually bring inflation back under control, two policymakers, Megan Greene and Huw Pill, voted for a rate rise because they fear higher energy costs could become embedded in the economy.

“If businesses pass those costs on to consumers and workers push for higher pay to offset rising household bills, inflation could prove much harder to bring back to target.

“The Bank of England is walking an increasingly narrow tightrope. Employers are under less pressure to raise wages, which should help contain inflation over time, while higher interest rates continue to dampen demand. Cut rates too quickly and inflation could re-emerge. Keep borrowing costs high for too long and today’s gradual cooling risks turning into something much colder for businesses, job seekers and economic growth.

“The biggest story impacting household finances right now remains the agreement between the US and Iran, which paves the way for the reopening of the Strait of Hormuz. The prospect of one of the world’s most important shipping routes reopening has already pushed oil prices lower, changing expectations for inflation, interest rates and financial markets.

“For mortgage holders, it’s potentially good news. Lower energy prices ease inflationary pressures, reducing the likelihood that interest rates will need to stay higher for longer.

“For savers, the picture is less positive. As expectations for future interest rates soften, savings providers have already begun trimming some of their best rates.

“It’s another reminder that events thousands of miles away can quickly find their way into our wallets, affecting everything from mortgages and savings to pensions, investments and household bills.”