Bank of England interest rate predictions

Our panel of experts share their predictions on interest, mortgage and savings rates for 2023.

The Bank of England (BoE) sets the official bank rate 8 times per year. If the base rate changes, it can immediately impact personal finances. Savings rates, mortgage rates and personal loan interest are all heavily influenced by what the Bank of England decides. After years of ultra-low interest rates in the UK, we are now seeing a lot of changes to the base rate due to high inflation.

At Finder, we have brought together an expert panel of academics, economists, mortgage experts and savings experts, asking them for a range of predictions and opinions on what will happen with the base rate at the next BoE meeting and for the rest of the year.

Interest rate predictions

  • The current base rate is 4.5% as of 11 May 2023.
  • 82% of experts predict that the base rate will be higher than 4% at the end of 2023.
  • 45% of experts predict that the base rate will sit at 4.25% by the end of 2023.
  • 18% of experts believe the base rate will be 5% or higher by the end of 2023.

Meet the panel

Full name Organisation Title
Alan Shipman The Open University Senior lecturer in economics
Charles Read University of Cambridge Fellow in economics
David McMillan University of Stirling Professor in finance
Giles Coghlan HYCM Chief market analyst
Jon Ostler finder.com CEO
Kate Anderson finder.com Deputy editor
Konstantinos Lagos University of Sheffield Hallam Senior lecturer in business and economics
Luciano Rispoli University of Surrey Senior lecturer in economics
Muhammad Ali Nasir Leeds University Associate professor in economics
Paul Dales Capital Economics Chief UK economist
Phillip Rush Heteronomics Founder and chief economist
Rob Peters Simple Fast Mortgage Principal
Stephen Sillars Chip Savings and investments editor
David Hollingworth* L&C Mortgages Associate director
Nitesh Patel* Yorkshire Building Society Strategic economist

* Only took part in the panel ahead of the BoE’s February meeting

Panel highlights

  • The current base rate is 4.5% as of 11 May 2023.
  • Three quarters (75%) believe the rate rise to 4.5% is the right decision.
  • One third (33%) of panellists who predicted a rate rise to 4.50% believe that fixed-rate mortgages will go higher and for longer.
  • 6 out of 10 (60%) panellists who provided housing commentary predict there will be a downward pull on house prices.
  • All but one expert agrees that savings rates will increase but trail the base rate.
  • Panellists are split 50/50 over whether the BoE should take a hawkish approach and tighten monetary policy throughout 2023.
  • The next base rate meeting is 22 June 2023.

Do you think current interest rates will hold, rise or fall?

Ahead of the 11th May Monetary Policy Committee (MPC) meeting, 92% of experts (12 of 13) correctly predicted that the Bank of England would raise the base rate again by 0.25%, while one panellist believed the interest rate would hold.

Three quarters (75%) of panellists who predicted a rate rise to 4.50% believe it is the right decision, whilst the other quarter (25%) disagree with the decision.

The main reasons given for the predicted rate increase were higher-than-expected inflation and rising wages. Paul Dales, chief UK economist at Capital Economics cites the “risk of the 2% inflation target being missed for even longer” as the driving force for the rate rise.

David McMillan, professor in finance at the University of Stirling, mentioned a vulnerability of the pound to the US dollar to be a main reason for a rate rise.

In our previous panel, 9 of the 11 panellists (82%) correctly predicted that the base rate would continue to rise further in 2023, so the expectation for yet another increase is not surprising given the current market.

Prediction Percentage
Will stay at 4.25% 92%
Will rise to 4.50% 8%

Should the Bank of England tighten monetary policy over the course of 2023?

Opinions are split equally over whether the BoE should tighten monetary policy.

Of the panel, 6 believe the BoE should take a hawkish approach, which involves raising rates to curb inflation throughout 2023.

Phillip Rush, founder and chief economist at Heteronomics, believes the BoE should take a hawkish approach, since “wage deals appear to be anchoring near 5% without the massive productivity growth or structurally imported disinflation necessary to make it consistent with the inflation target. It needs to hawkishly assert its credibility to break excessive pay deals.”

However, 6 panellists believe that the BoE should take a dovish approach and avoid excessive rate hikes.

Dr. Konstantinos Lagos, senior lecturer in business and economics at the University of Sheffield Hallam, says that “due to the monetary policy transmission time lags, the BoE should be careful about the speed and magnitude of future rate hikes, and be ready to fine-tune rates in the future according to the economic/financial data”.

Ahead of the meeting in February 2023, 55% of our previous panel wanted the Bank of England to follow a dovish approach. Persistent inflation after the February rate rise may be pushing the BoE to be more hawkish.

Opinion Percentage
The BoE should take a hawkish approach 46%
The BoE should take a dovish approach 46%
The BoE should hold 8%

When is the next Bank of England meeting?

The Bank of England’s monetary policy committee (MPC) meets 8 times a year. The last meeting of this year will be held on 14 December 2023.

MPC meeting schedule 2023
2 February
23 March
11 May
22 June
3 August
21 September
2 November
14 December

What will the impact be on mortgage rates and products?

Two thirds of panellists that predicted a 0.25% rise in the base rate believe that this will not have a negative impact on fixed-rate mortgages, whilst the remaining experts believe that fixed-rate mortgages will go higher and for longer.

Alan Shipman, senior lecturer in economics at The Open University, predicts that “although floating and short-term fixed mortgage rates will rise in line with any base rate increase, longer-term fixed rates are likely to stay unchanged or even drift downwards”.

Meanwhile, Dr Charles Read, a fellow in economics at the University of Cambridge, believes that a rise in the base rate is “likely to increase mortgage rates and restrict affordability in the housing market, affecting both first-time buyers and investors”.

Rob Peters, principal at Simple Fast Mortgage, predicts the base rate will hold and long-term swap rates will go down, which “should encourage mortgage lenders to follow suit” and lower long-term fixed mortgage rates.

Prediction Percentage
No negative impact on mortgages 58%
Fixed mortgages will go higher and for longer 33%
No comment 8%

What will the impact be on house prices?

Of the panellists who provided commentary on house prices, 6 out of 10 (60%) predict there will be a downward pull on house prices, following a rate rise of 0.25%. On the flip side, 4 out of 10 (40%) believe that house prices will remain stagnant.

Dr Luciano Rispoli, senior lecturer in economics at the University of Surrey, said: “House prices will be affected depending on the availability of mortgage products and rates. However, higher mortgage rates should unambiguously put further downward pressures on house prices.”

Muhammad Ali Nasir, associate professor in economics at the University of Leeds, agrees, stating: “House prices are already going down, a rate rise would suppress them further.”

Kate Anderson, deputy editor at finder.com, instead believes that prices in the housing market will remain stable. She said: “House prices are more subdued than previous years, but we haven’t seen them drop off a cliff edge despite increased borrowing costs. The UK housing market is proving resilient, propped up by solid first-time buyer demand.”

Prediction Number of experts
Downward pull on house prices 6
Stagnant house prices 4
No commentary given 3

How do you think this would affect the market for savings rates? Do you think any rate increase is likely to be passed on to consumers?

All but one panellist agrees that a base rate rise will be passed on to savings rates. However, they also believe that savings rates will trail the base rate.

As Giles Coghlan, chief market analyst at HYCM, explains: “In theory, higher interest rates result in more expensive borrowing. This, in turn, should translate to higher interest rates on savings accounts with another rate hike. However, it is essential to note that the average savings rate is often below inflation, and traditional high street banks may take their time when passing on the base rate increase to savers.”

One panellist believes this could change, with the Financial Conduct Authority (FCA) putting pressure on banks to increase savings rates to match the base rate more closely.

Jon Ostler, CEO at finder.com, said: “1 year fixed rates have hit a 15-year high, and we will continue to see saving opportunities for those who shop around.”

Stephen Sillars, savings and investments editor at GetChip, counters: “The high-street banks have not shown any willingness over the 11 previous increases to properly reward their savers, so I don’t see them starting now.”

How high will interest rates go in the UK?

We asked the panellists what they think a rise in the base rate would do to mortgage rates and the products on offer from lenders and whether this would impact house prices.

We asked panellists whether the base rate rise would affect the market for savings rates and if any rate increase is likely to be passed on to consumers.

  • Click here for more research. For all media enquiries, please contact:

    Matt Mckenna
    UK communications manager
    T: +44 20 8191 8806
    matt.mckenna@finder.com@MichHutchison/in/matthewmckenna2

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