Bank of England holds interest rates at 5.25% as cost-of-living challenges start to ease

Credit: PA

By ITV News Producer Hannah Ward-Glenton

The Bank of England has opted to hold interest rates at 5.25%, as inflation is slowly being tamed.

It was largely expected that the central bank's committee would hold at the current rate, which remains the highest it has been since 2008.

The interest rate, or base rate, determines lending rates for banks, impacting savings and loans, such a mortgage deals.

Cost-of-living pressures have eased considerably in recent months, despite a surprise uptick in the latest inflation figure, which rose to 4% for the month of December, driven predominantly by increased alcohol and tobacco prices.

The Bank of England expects inflation to return to its target rate of 2% by the end of 2025.

Financial markets will be looking closely at comments made by the Bank’s Monetary Policy Committee (MPC), watching for hints as to when an interest rate cut could be on the table.

A drop in interest rates would provide some relief for borrowers who have been struck hard by skyrocketing rates in the last couple of years.

Residential mortgage arrears jumped to a six-year high between July and September, according to the Bank of England, with borrowers falling behind loan repayments totalling just under £19 billion.

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