What is the Bank of England Base Rate?
[June 2024]

By Georgia Galloway | Thursday 20th June | 19 minute read

The Bank of England base rate is the most important interest rate in the UK as it influences all other rates and directly impacts the money you borrow and the money you save.

The base rate, set by the Bank of England (BoE), is pivotal in influencing the UK's broader financial conditions, affecting both the borrowing costs for banks and the rates offered to consumers on loans and savings. 

The BoE adjusts the base rate based on economic indicators such as inflation, growth, and employment to stabilise prices and encourage economic growth. 

Changes in the base rate directly impact consumer spending, borrowing costs, and savings returns, playing a critical role in economic management and homeowner expenses in the UK.

What is the Bank of England Base Rate? [June 2024]

What is base rate?

The "Base Rate" (bank rate) is the rate the Bank of England charges other banks and lenders when they borrow money. It influences the level of all other interest rates in the UK and impacts the rates banks charge people to borrow money or pay on their savings.

The Bank of England (BoE) sets the base rate, which is reviewed every six weeks but can be increased or decreased at any time. It can also remain the same.

If the Base Rate increases:

  • The cost of borrowing increases (unless interest rates on a loan are fixed).
  • Interest earned from savings increases.

If the Base Rate decreases:

  • Variable rate borrowing costs go down.
  • Interest earned on savings will decrease.

If the Base Rate remains unchanged:

  • Variable rate borrowing costs don't change.
  • Interest earned on savings doesn't change.

When determining the base rate, the BoE hold a meeting (Monetary Policy Committee (MPC)) to review the state of the economy and attempt to forecast what they expect it to be over the forthcoming months. Factors they review include:

  • How fast prices are rising (inflation).
  • How the UK economy is growing (GDP).
  • How many people are employed (employment rate).

Changes to the base rate impact the following:

  • Mortgages
  • Loans
  • Bridging Finance
  • Savings
  • Consumer Spending
  • Business Investment

Generally, a higher base rate is good for savers, and a lower base rate is good for borrowers.


What is the base rate? June 2024

The base rate is 5.25% as of June 2024.

The rate has been 5.25% since August 2023, when it increased from 5%, and is the highest since July 2007. Despite inflation dropping from 2.3% to 2% (June 19, 2024), the base rate did not change in June 2024 when the Bank of England's Monetary Policy Committee (MPC) voted by a majority of seven to two to keep rates unchanged. 

The base rate was almost zero (0.1%) at the beginning of December 2021, demonstrating how much the rate can change in just a few years.


Bank of England base rate: When does it change?

The Bank of England (BoE) 6-weekly base rate review is completed at the Monetary Policy Committee (MPC) meetings.

"We set Bank Rate to influence other interest rates. We use our influence to keep inflation low and stable."
Source: Bank Of England 2024.

The Bank can also call emergency meetings if needed, such as the emergency rate cut in March 2020 amid the coronavirus outbreak, when the rates were reduced from 0.75% to 0.25%. This cut resulted from the sharp fall in trading conditions, taking borrowing costs back down to their lowest in history to free up billions of pounds to help banks support businesses. Before 2020, the Bank's last emergency rate cut was during the financial crisis in 2008.   

The MPC consists of nine members who vote on a rate cut, rise, or leave the rate unchanged: the Governor, the three Deputy Governors for Monetary Policy, Financial Stability, Markets and Banking, the Chief Economist, and four external members appointed directly by the Chancellor.

How often does the Bank of England base rate change?

The BoE base rate is reviewed 8 times a year, approximately every 6 weeks, but that doesn't mean the rate changes that frequently. For example, there have been 0 changes so far in 2024, there were 5 base rate changes in 2023, 8 changes in 2022, and just 1 change in 2021.

The Monetary Policy summary and minutes are published at 12 noon on a Thursday eight times a year on the day of the Monetary Policy Committee (MPC) meeting.


Bank of England base rate history

The table below shows how the BoE base rate has changed since 2020.

Base Rate Date Changed Rate Base Rate Increase/Decrease (compared to previous rate)
03 Aug 23 5.25% +0.25
22 Jun 23 5.00% +0.50
11 May 23 4.50% +0.25
23 Mar 23 4.25% +0.25
02 Feb 23 4.00% +0.50
15 Dec 22 3.50% +0.50
03 Nov 22 3.00% +0.75
22 Sep 22 2.25% +0.50
04 Aug 22 1.75% +0.50
16 Jun 22 1.25% +0.25
05 May 22 1.00% +0.25
17 Mar 22 0.75% +0.25
03 Feb 22 0.50% +0.25
16 Dec 21 0.25% +0.15
19 Mar 20 0.10% -0.15
11 Mar 20 0.25% -0.5 (was 0.75%)

When is the next Bank of England interest rate review?

The next BoE rate review is on Thursday, 1 August 2024.

Confirmed MPC meeting dates for 2024:

  • Thursday, 1 February 2024 - no rate change
  • Thursday, 21 March 2024 - no rate change
  • Thursday, 9 May 2024 - no rate change
  • Thursday, 20 June 2024 - no rate change
  • Thursday, 1 August 2024
  • Thursday, 19 September 2024
  • Thursday, 7 November 2024
  • Thursday, 19 December 2024

2025 MPC meetings provisional dates:

  • Thursday, 6 February 2025
  • Thursday, 20 March 2025
  • Thursday, 8 May 2025
  • Thursday, 19 June 2025
  • Thursday, 7 August 2025
  • Thursday, 18 September 2025
  • Thursday, 6 November 2025
  • Thursday, 18 December 2025

UK inflation rate

The "Inflation Rate" measures the increase or decrease in the price of goods and services over a given period, usually a year. Increases are called inflation, and decreases are called deflation. The Office for National Statistics (ONS) tracks hundreds of items to determine the UK inflation rate, from Food & non-alcoholic beverages to Education.

ONS - Allocation of items to Consumer Prices Index including owner occupiers' housing costs (CPIH) divisions in 2024:

  CPIH weight, February 2024³ (per cent) Observed variation in price changes¹ Observed variation in price changes² ³ (per cent of total)
Food & non-alcoholic beverages 9.1 Medium 25
Alcohol & tobacco 3.2 Low 4
Clothing & footwear 4.7 High 12
Housing & household services 29.9 High 4
Furniture & household goods 5.0 Low 10
Health 2.1 Low 3
Transport 10.9 Low 7
Communication 1.9 Medium 2
Recreation & culture 11.5 High 17
Education 2.4 Low 1
Restaurants & hotels 11.7 Low 6
Miscellaneous goods & services 7.5 Low 10

Source: Consumer price inflation from the Office for National Statistics (as of May, 2024)

What is the inflation rate in the UK?

Inflation is 2% as of June 2024.

The UK inflation rate is 2%, the first time in three years that inflation has hit the Bank of England's target. Prices rose at 2% in the year to May, a fall from the previous inflation rate of 2.3%.

When inflation eases, it doesn't mean the prices of goods and services are decreasing; it means they are increasing less quickly.

How does the base rate impact inflation?

In theory, inflation and interest rates have an "inverse" relationship:

  • When rates are low, inflation tends to rise.
  • When rates are high, inflation tends to fall.

How does inflation impact the base rate?

The BoE increases base (interest) rates when inflation is too high. The theory is that by making borrowing more expensive, people have less money to spend, reducing the spending power for goods and slowing demand and price rises.

By adjusting the base rate, the BoE manipulates economic factors that influence inflation, aiming to stabilise prices and sustain economic growth.

Here is how the base rate affects key areas of the economy.

Cost of Borrowing

Changes in the base rate influence the cost of borrowing and impact the rates banks offer their customers for loans and mortgages. When the base rate is high, borrowing becomes more expensive, which can reduce business and consumer spending and investment. When the base rate is low, borrowing is less expensive, but interest on savings reduces.

Consumer Spending

As borrowing costs rise, consumer spending typically slows as loans and credit become more expensive. This reduced spending can lead to a lower ability to pay for goods and services, which can help to reduce inflation.

Business Investment

Similarly, higher interest rates can reduce business investment as the cost of financing new projects increases. This slowdown in investment can reduce pressure on the economy's capacity, which also helps to control inflation.

Exchange Rate Effects

Changes in the base rate can affect the value of the pound. A higher base rate generally strengthens the pound as investors seek higher returns on UK financial assets, making imports cheaper and thus reducing import price pressures, which can help to lower inflation.

Expectations and Confidence

The BoE's decisions on the base rate also influence economic expectations. If the market believes that the BoE is committed to controlling inflation, expectations of future inflation adjust accordingly. Lower inflation expectations can lead to more moderate wage and price-setting behaviour across the economy, further helping to control inflation.

Wages and Employment

High interest rates can lead to lower job creation and dampening wage growth. Since wages are a significant component of costs for many businesses, slower wage growth can reduce cost pressures within the economy, helping to control inflation.


Bank of England base rate predictions 

Current speculation and opinion regarding the base rate differ between financial experts, economists, research firms, and analysts. As of June 2024, predictions are that the base rate will come down this year; however, when the changes occur and by how much, vary depending on who's making the prediction.

When will the base rate come down?

The latest prediction is that the base rate will come down in 2024. Many economists have suggested that it will reduce either this August or September, whereas newer predictions point to a rate cut later this year in November or December.

The current base rate of 5.25% has been held since August 2023. As predicted, the BoE held interest rates at 5.25% in June as the MPC voted by a majority of seven to two to keep rates unchanged. But with inflation hitting the government's target of 2% and the BoE policy minutes stating the decision to keep the base rate unchanged had been "finely balanced", there is building belief there may be a rate cut at the next meeting on Thursday, 1 August 2024. 

How low will BoE rate go? 

Economic researchers predict only one or two rate cuts by the end of the year, dropping by 0.5% to 4.75% by December. While these are the current predictions, things change, and predictions can change quickly. Earlier this year, economists had predicted a far more aggressive cut of rates, and these expectations have lowered.

Whilst not a prediction, the International Monetary Fund (IMF) has recommended that UK interest rates be cut to 3.5% by the end of 2025.

If the bank rate decreases, how does it impact businesses?

When the UK's bank rate decreases, it generally signals a decrease in the cost of borrowing, which can significantly impact businesses across various sectors. Lower interest rates can make financing more accessible, encouraging businesses to invest in growth and expansion projects. This leads to increased economic activity and potentially higher employment rates. The effects can vary depending on the business sector and the type of financial products businesses use.

Lines of Credit: A reduction in the bank rate often leads to lower interest rates on lines of credit. As these are typically variable-rate products, the cost of existing and new lines of credit decreases, making them more affordable. This allows businesses to manage cash flow more effectively, as they can borrow more at a lower cost when needed to cover operational expenses or unexpected costs.

Bridging Loans: Bridging loans, which are short-term funding solutions used to bridge the gap between financial needs and the availability of longer-term financing, also become cheaper with a lower bank rate. This can be particularly beneficial for property or business investments that require quick funding as bridging loans allow businesses to capitalise on immediate market opportunities.

Secured Loans: Secured loans, backed by assets as collateral, typically have lower interest rates compared to unsecured loans. When the bank rate drops, the interest rates on secured loans usually decrease, reducing the cost of borrowing. This makes large capital investments more attractive and financially feasible for businesses, as the overall financing costs are reduced.

Invoice Finance: Invoice finance allows businesses to borrow money against amounts due from customers, helping to improve cash flow. The cost of this type of financing is influenced by the bank rate; when rates fall, the interest charges on such advances also tend to drop. This provides businesses with a cost-effective way to access funds quickly without waiting for payment from customers, thus ensuring smoother operational continuity.

Consumer Spending: A decrease in the bank rate tends to stimulate consumer spending by making credit more affordable, increasing consumers' disposable income, increasing consumer confidence, reducing borrowing costs, and thereby driving economic activity that can financially benefit businesses.

If the bank rate decreases, how does it impact house buyers?

A decrease in the Bank of England's base rate can impact house buyers in the UK by changing the cost of mortgages, as well as the wider house market and economy.

Lower Mortgage Rates: The most direct impact of a decrease in the base rate is typically a reduction in mortgage interest rates. Lower mortgage rates reduce the potential monthly mortgage payments for prospective house buyers.

Increased Borrowing Capacity: Lower interest rates decrease borrowing costs. This means potential homebuyers might be able to afford to borrow more, potentially increasing their purchasing power in the property market. This can allow buyers to afford homes previously out of their budget.

Stimulating Housing Market Activity: The wider impact of decreasing base rate interest rates is that it can stimulate the housing market by making home buying more accessible to more people. Increased demand can drive up property prices, which could disadvantage house buyers looking in areas with already high property values.

Economic Confidence: Generally, a lower base rate is part of a broader monetary policy to stimulate economic growth. This can increase economic confidence, encouraging more people to buy homes and make long-term investments.

If the bank rate decreases, how does it impact homeowners?

A decrease in the Bank of England's base rate can have several positive impacts on UK house buyers.

Lower Mortgage Rates: If the bank rate decreases, homeowners' mortgages typically have a lower interest rate. This is particularly true for those with variable-rate or tracker mortgages, which directly follow the base rate. For homeowners with fixed-rate mortgages, their mortgage rates will be impacted when they remortgage or when their current mortgage term expires.

Refinancing Opportunities: When interest rates drop, it may be an ideal time for existing homeowners to remortgage. Remortgaging can potentially reduce monthly payments, save money over the life of the loan, or allow homeowners to access cash via released equity.

Improved Cash Flow for Homeowners: A decrease in the base rate can mean lower monthly mortgage payments for existing homeowners with a variable-rate mortgage. This improved cash flow can free up income for other expenditures, investments or savings.

Is the base rate going up? 

As of June 2024, predictions are that the base rate won't increase over the next few years. But those predictions are based on current economic forecasts. Should unforeseen events occur that impact the economy, there is the possibility that the base rate may be increased,

How high will BoE rate go? 

Rather than increase, the latest predictions are that the BoE rate will decrease from its current level, which is the highest for 16 years. Historically, it was higher for most of the 1980s and 1990s, and it was 17% in November 1979.

If the bank rate increases, how does it impact businesses?

As opposed to when the bank rate decreases, when it increases, borrowing costs and interest rates rise, making business investments more expensive. When the bank rate increases, businesses are less likely to borrow, which can slow down projects, limit investments and reduce staff hiring, and when consumers have less disposable income, businesses are likely to be negatively impacted.

Lines of Credit: An increase in the bank rate leads to higher interest rates on lines of credit. This increase makes it more expensive for businesses to borrow against these lines, potentially restricting access to necessary funds for daily operations or emergency expenses. Businesses may need to reduce their reliance on these credit lines or find alternative funding sources.

Bridging Loans: Bridging loan rates will also see a rise in interest rates following a bank rate increase. The higher costs associated with these loans when the base rate increases can make them a less attractive option for businesses needing immediate cash flow. This could lead to missed opportunities or delays in project completion.

Secured Loans: Secured loans will become costlier as interest rates rise. The increased financing costs can deter businesses from pursuing large-scale investments or capital improvements, as the return on these investments may not justify the higher borrowing costs, thereby impacting long-term growth plans.

Invoice Finance: As the bank rate rises, the cost of invoice financing increases, making it a more expensive option for managing cash flow. This could lead businesses to seek other ways to enhance their cash flow management or to negotiate better payment terms with customers to reduce the dependency on invoice financing.

Consumer Spending: Higher bank rates can also dampen consumer spending, which in turn can affect businesses directly, particularly those in the retail and consumer services sectors. As consumers face higher costs on mortgages and loans, their disposable income decreases, leading to reduced spending on goods and services, resulting in lower sales revenues for businesses.

If the bank rate increases, how does it impact house buyers?

Overall, an increase in the UK bank rate can make it more challenging for house buyers by raising borrowing costs, impacting affordability, and potentially leading to a cooler housing market.

Higher Mortgage Costs: A higher bank rate has the most direct impact on mortgage interest rates. Buyers with variable-rate or tracker mortgages will see their interest rates rise, which increases their monthly mortgage payments. This higher cost can strain household budgets and reduce disposable income.

Decreased Affordability: The increased interest rates mean higher borrowing costs for prospective homebuyers. This can decrease the affordability of homes as the same mortgage amount will now cost more per month in interest payments. Consequently, some buyers may have to lower their budget or postpone buying a home.

Qualification Challenges: Higher mortgage rates can also affect a buyer's ability to qualify for a mortgage. Lenders assess affordability based on income and outgoing expenses; higher interest rates mean higher monthly payments, which can reduce the loan amount that a buyer qualifies for.

Reduced Market Activity: If higher rates deter enough potential buyers or cause them to be unable to afford the higher payments, the housing market could slow down. Fewer buyers lead to reduced demand, which can stabilise or even decrease house prices, especially in a highly interest-rate-sensitive market.

Long-Term Planning: Buyers might opt for fixed-rate mortgages to lock in the current rates for a longer period, anticipating further increases in the base rate. This can protect them from future rate hikes but might come at the cost of higher initial rates compared to variable or tracker options.

Cost of Fixed-Rate Mortgages: Fixed-rate mortgages will likely become more expensive as lenders recalibrate their offers to reflect the higher base rate. The initial costs and interest rates on new fixed-rate mortgages are likely to be higher, affecting affordability.

Impact on Housing Prices: In the longer term, sustained higher interest rates could decrease housing prices if demand drops significantly. Sellers might lower prices to attract fewer buyers who can afford to purchase at the higher rates.

Investment Perspective: Higher interest rates might make property investment less attractive than other, higher-yielding investments, potentially slowing down the investment-driven segments of the housing market.

If the bank rate increases, how does it impact homeowners?

An increase in the UK bank rate can lead to higher costs for homeowners with variable or tracker mortgages, potentially affect property values, influence the broader housing market, and impact personal financial decisions and stability.

Higher Mortgage Payments: Homeowners with variable-rate or tracker mortgages will see an immediate increase in their mortgage payments. These types of mortgages adjust according to changes in the base rate, so when the rate goes up, so do the payments.

Financial Pressure: Increased mortgage payments can strain homeowners' finances, potentially leading to a tighter household budget. This can affect their ability to save or spend on non-essential goods and services, impacting overall financial stability.

Refinancing Costs: Those considering refinancing to secure a better interest rate might find it less advantageous. As interest rates rise, the available refinancing rates may no longer provide significant savings, and the costs associated with refinancing (like fees) might outweigh the benefits.

Fixed-Rate Mortgages: Homeowners on fixed-rate mortgages will not experience an immediate change in their payments. However, once their fixed-rate term ends, they may face significantly higher rates if they need to renegotiate or switch to a variable rate, depending on the prevailing economic conditions.

Equity Growth Slowdown: Higher interest rates can cool the housing market, potentially leading to slower growth in home equity. Homeowners looking to sell might find that the value of their homes increases at a slower pace, affecting their return on investment.

Reduced Demand for New Mortgages: An increase in the bank rate can reduce demand for new mortgages, as potential buyers might be discouraged by the higher borrowing costs. This could slow down the housing market, affecting homeowners looking to sell their properties.

Investment Decisions: Homeowners considering investing in additional property for rental income might reconsider if mortgage rates increase, as the cost of financing a property would be higher, potentially lowering the investment returns.

Increased Rent Costs: Landlords with variable mortgages might increase rents to cover the higher mortgage payments, which could impact tenants and lead to higher vacancy rates if tenants cannot afford the increases.


Mortgage base rate

The UK mortgage base rate typically refers to the interest rate banks charge on their standard variable rate (SVR) mortgages, often based on the Bank of England's base rate. There are 8,501,000 residential mortgages in the UK, 81% of which are fixed, 8% are tracker, and 9% are SVR.

Residential mortgages outstanding Number Percentage of total
Fixed 6,881,000 81%
Tracker 639,000 8%
SVR 773,000 9%

What is the mortgage base rate?

Each bank sets its own SVR, which varies widely between lenders. The SVR is the default rate borrowers pay once any fixed, tracker or discount mortgage deal period ends.

As of June 20, 2024, the average SVR across all UK lenders is 8.54%. 

Deal type and length Current average mortgage rate - all lenders Standard Variable Rate (SVR) Rate difference
2-year fixed-rate (75% LTV) 6.09% 8.54% +2.45%
5-year fixed-rate (75% LTV) 5.40% 8.54% +3.14%
2-year variable rate (75% LTV) 5.85% 8.54% +2.69%

How does the Bank of England interest rate affect mortgages?

The impact of the BoE interest rate on mortgages depends on your mortgage type. 

When the base rate changes, lenders usually adjust their SVR in response, though not always to the same extent or at the same time. A rise in the base rate often leads to an increase in the SVR, making mortgages more expensive and vice versa.

Fixed-rate mortgage

When the BoE changes the base rate, homeowners' mortgage payments won't be directly impacted immediately. As their mortgage rate is fixed, payments will stay the same until the fixed rate ends. But when the mortgage term ends, the next term will be impacted by an increase (higher mortgage payments) or decrease (lower mortgage payments) in the interest rate. This is why reviewing your available remortgage options is crucial when your existing mortgage is nearing its end.

Variable rate tracker mortgage

If you're on a variable-rate mortgage, the interest you pay each month will move in line with the base rate change. This could be beneficial should the rates drop or mean you pay more when the rates increase.

Offset mortgage

Offset mortgages link your mortgages and savings together to reduce the amount of interest charged. They track the base rate, so it's likely monthly payments will change. But you're also using your savings to reduce the mortgage balance the interest is charged on. The more you offset, the less impact a change to the base rate would have on your offset mortgage payments.

Standard variable rate

Standard variable rate (SVR) mortgage lenders set the SVR. Although not directly linked to the base rate, it is usually the primary influence on whether SVR increases or decreases.

Buy-to-let mortgage

Buy-to-let mortgages can have variable or fixed rates, so your BTL mortgage will depend on which rate it's on.  

How does the Bank of England interest rate affect bridging loans?

The BoE interest rate impacts bridging loans in several ways.

Bridging Loan Interest Rates: Many institutional bridging loan lenders borrow from banks, a higher base rate will increase the interest rate of a bridging loan. Conversely, if the base rate decreases, the interest rates on bridging loans are generally lower. This makes the loans more or less expensive for borrowers, affecting the overall cost of the loan. Typically, bridging loan interest rates are fixed, and therefore, the interest on the loan during the loan term is not affected by changes to the base rate. 

Private Lender Rates: Private bridging loan lenders are free to set their rates at any percentage. Market forces, such as supply and demand or competitor pricing, do influence their decision when setting rates. Therefore, any increase by the large bridging loan lenders will influence the interest rate the private lenders charge.  

Default Interest Rates: Default interest on some bridging loan products is calculated from the point of default. The contract conditions typically bind the borrower to pay the interest at the default rate, which is applied to the whole term of the bridging loan. It is typically double the original interest rate.

Net Loan Amount Change: During base rate increases, the net loan amount will be reduced. Max loan amounts are determined by LTV; as bridging is grossed up, any interest rate increase will reduce the amount of the net loan. For example:

£125,000 of available equity in a residential property, max LTV is 80% = £100,000 gross loan. If the interest is 1% per month and the loan term is 1 month, then this will reduce the net loan available to £99,000. If the loan term is 12 months, then the maximum net loan would be £88,000. 

The cost of interest for 12 month bridging loans below is based on a serviced interest calculation.

Gross Loan Interest Rate at 1% per month Interest Rate at 2% per month Term in months Total Interest for Term at 1% Total Interest for Term at 2% Net Loan Available at 1% Net Loan Available at 2%
£100,000 £1,000 £2,000 12 £12,000 £24,000 £88,000 £76,000
£200,000 £2,000 £3,000 12 £24,000 £48,000 £176,000 £152,000
£500,000 £5,000 £10,000 12 £60,000 £120,000 £440,000 £380,000
£1,000,000 £10,000 £20,000 12 £120,000 £240,000 £880,000 £760,000

Loan Demand: Fluctuations in the base rate can also influence the demand for bridging loans. When rates are low, more investors and homebuyers might consider bridging loans attractive for quickly securing properties, taking advantage of market opportunities, or funding developments. Higher rates might deter some borrowers due to the increased cost, leading to a decrease in demand and impacting the bridging loan market.

Lending Criteria: As the Bank of England adjusts the base rate, bridging loan lenders may also alter their lending criteria. During periods of higher rates, lenders might tighten their requirements due to the increased risk of default. Conversely, during periods of lower rates, lenders may loosen criteria to encourage borrowing and capitalise on more favourable borrowing conditions.

Impact on Investment Decisions: The cost of a bridging loan can influence investment timing and decisions, particularly in property. Developers and investors rely on such loans for speed and flexibility, but changes in the interest rate can affect the feasibility of projects, potentially leading to delays or cancellations if the costs become prohibitive.


Conclusion

The base rate, or bank rate, is the interest rate at which the Bank of England charges other banks and lenders when they borrow money. It is a pivotal influence on all other interest rates in the UK, affecting the rates banks charge for loans and the interest they pay on savings. 

The Bank of England's base rate can increase to curb inflation by making borrowing more expensive and savings more attractive or decrease to stimulate spending by making borrowing cheaper.

Changes in the base rate can significantly impact borrowers and savers, influencing decisions on mortgages, savings, and overall financial planning.


ONS Notes - Allocation of items to Consumer Prices Index including owner occupiers' housing costs (CPIH) divisions in 2024

1. Based on an analysis of variation in price changes between the individual items chosen to represent each division in the period 2019-2023. Improvements to the analysis have been made since our Consumer price inflation basket of goods and services: 2022 article, so comparison of the latest figures should only be made with the 2023 analysis and not beyond.

2. These figures should be viewed as providing only a general indication of the distribution of items among the 12 CPIH divisions. For example, the sample of prices underpinning an existing item might easily be stratified in some way to form two or more distinct items; conversely, items could be merged to form a single item representing a wider, more heterogeneous, spending category. A specific example of this is the item ‘UK university tuition fees’. This is classified as one item but the index takes into account prices for undergraduate, postgraduate and part-time courses. A more extreme example would be rail fares in the UK which are covered by six items but, given the transaction data underlying the series, could be stratified in many detailed ways.

3. The sum of the percentages may not equal 100 due to rounding.

Source: ONS Consumer price inflation basket of goods and services: 2024

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