The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.
Even if you have bad credit, you can still get student loans. Most federal loans don’t require a credit check, which means you can borrow funds for education regardless of your credit history.
The Education Data Initiative found that the average cost of college is $36,436 per year in the United States. This includes tuition, living expenses, books and supplies. This isn’t the same at all colleges, and you can pay significantly less. The average cost for in-state tuition is $9,678, but over the years spent in school, these costs add up. Many people don’t have this kind of cash on hand, so many take out student loans.
If you have a bad credit score, you may want to know about student loans for bad credit, but you may have better options. Bad credit loans come with much higher interest rates, so it’s beneficial to research all of the options so you don’t graduate with more debt than necessary.
Today, you’ll learn about how to get student loans with bad credit as well as which options are right for you.
How to get a student loan with bad credit
If you have a bad credit history, you have two options if you want to take out a student loan. You can apply for federal student loans or find a cosigner for a private student loan.
Federal student loans are funded by the U.S. Department of Education, and they’re basically no-credit student loans since you can apply regardless of your credit history.
Private student loans are offered by a variety of nongovernment financial institutions, and they’re often limited to people with higher credit scores or cosigners.
Federal student loans are often the better option because they’re low-interest loans for students with no credit or bad credit. Private student loans have much higher interest rates, which makes them more expensive as a whole. In some cases, students may need to take out both of these loans, depending on the cost of their school.
In order to receive a federal student loan, you need to meet the eligibility requirements first. Some of the requirements include:
Proof of financial need
Proof of U.S. citizenship
Have a valid Social Security number
Enrolled in a degree or certificate program
Your financial aid is based on need. This is known as “need-based aid,” which uses a calculation to determine how much you can receive based on your Student Aid Index (SAI) and Expected Family Contribution (EFC).
In addition to United States citizens, DACA recipients may also qualify for federal student loans.
Federal student loans for bad credit
Federal student loans are an excellent option for many people, including those with bad credit, because they are based on financial need rather than credit scores.
You may be eligible for any of the following types of federal student loans:
Direct Subsidized Loans: These loans are available based on financial need, and they include the benefit of having the Department of Education pay interest while you’re enrolled in school as an undergraduate.
Direct Unsubsidized Loans: Unsubsidized loans are offered regardless of financial need, and they will accrue interest even when you’re enrolled in school. With these loans, you don’t need to show financial need.
Direct PLUS Loans: These loans are available to graduate students or the parents of undergraduates, and they are the only federal loans that require a credit check. You may still qualify with a bad credit score, but these have higher interest rates than other federal loans.
Direct Consolidation Loans: These loans enable you to combine all of your federal loans into a single loan, which can reduce the complexity of your payments.
Private student loans for bad credit
Your credit score matters if you want a private student loan. To apply for a private student loan, you can go through regular lenders like banks or credit unions. Unlike many other private loans, you may not be able to find bad credit loans for student loans.
One of the best ways to qualify for a private student loan with no credit or bad credit is to find a cosigner. A cosigner is someone with a good credit score, so the lender uses their score rather than yours. The cosigner needs to have a good credit score to help you qualify, and it’s important to note that if you miss your payments, it can harm both of your credit scores.
Federal loans vs. private loans
Federal student loans are typically the best option if you’re trying to figure out how to get a student loan with bad credit. You don’t need to find a friend or family member to cosign on the loan with you, and the interest rates are lower. If the school you choose is more expensive, you may need to take out a private loan in addition to your federal student loan.
It’s also beneficial to understand the difference between the interest rates. The average interest rate for fixed-rate student loans is between 4.8 and 12 percent. If the private loan has a variable interest rate, the average is between 5.9 and 15 percent. However, the average interest rate for federal student loans is only 5.5 percent.
For example, the average student loan debt is $37,787. If you took out a federal student loan for this amount and paid it off over the course of 10 years, it would cost a total of $49,211, including interest. That same loan could cost as much as $73,156 with a private student loan.
How FAFSA works
The Free Application for Federal Student Aid (FAFSA®) is what student borrowers use to receive federal student loans. When taking out federal student loans, you need to fill out the FAFSA each year because it’s a needs-based program, so the amount may vary depending on different factors. They’re mainly looking at your personal finances and your family’s financial situation.
Each year, enrollment for the FAFSA opens on October 1st, and the deadlines are on the FAFSA website. Deadlines can vary by state and by college, so the site also lists additional information for every state.
How to improve your credit before applying for a student loan
You may need to take out student loans regardless of your situation, and one of the best things you can do is improve your credit score. When you have good credit, you can worry less about finding bad credit student loans and get better interest rates as well.
The following are some simple ways you can start improving your credit:
Make your payments on time
Pay off your debts
Pay off collection accounts
Keep your credit utilization low
Piggyback on someone’s credit as an authorized user
How to apply for bad credit student loans
Prior to applying for federal or private student loans, there are some steps you can take to make the process a little easier:
Calculate the loan amount: Before applying, you should know how much you’ll need.
Fill out the FAFSA form: Federal student loans are often the better choice, so it’s helpful to start here. If you need more, you can consider private student loans.
Compare private student loans: If you need additional money from a private student loan, shop around. Compare the loans to find the lowest interest rate and best loan terms.
Try to find fixed-rate loans: Variable interest rates mean the interest can change. A fixed-rate loan means that your payments will stay consistent.
Assess repayment options: Understand your loan as best as possible. Look into the grace period and if there are enrollment restrictions on the loan. Some federal loans require you to be enrolled to qualify for deferred payments.
Find a cosigner: Talk to potential cosigners before applying for private student loans for bad credit.
Alternatives to student loans for bad credit
Whether you get a federal student loan, a private loan or both, it’s always best to minimize your debt. Some alternatives to student loans you can consider include:
Working while attending school: Some schools cost less than others, especially in-state schools. You may be able to afford school by working and paying your tuition with cash.
Work-study programs: You may be able to do a work-study program, which allows you to work part-time for the school while attending. This gives you experience and a way to earn money.
Scholarships: There are many different scholarships out there. With some time and research, you can apply for different scholarships to help cover the cost.
Personal loans: Although these are also loans, this is a good option if you have some college savings and only need to borrow a small amount for a shorter period of time.
Check your credit before applying for student loans
Another way to work on your credit is to check your credit report for any errors harming your credit score. Inaccurate derogatory marks can usually be challenged and removed from your report.
Lexington Law Firm has a team of credit professionals who could help you address errors on your credit reports, and if you’re unsure of your credit score, you can get your free credit assessment today.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.
In general, you should be skeptical any time someone says a future week will be more volatile. There’s really no way to know such things in advance, but this time is an exception.
While we can’t have any idea which direction rates will move next week, we can be sure that we’ll see more volatility. Part of the reason is that the outgoing week would have been hard pressed to be any less volatile. For rates, it was largely an aimless drift apart from two offsetting reactions to calendar events on Thursday and Friday (highlighted below).
Thursday’s sharper drop in bond yields followed a higher reading in the weekly Jobless Claims data. This was one of the only economic reports that came out this week. It showed an abnormally large change that resulted in the highest reading since August 2023. While this could prove to be an outlier, it got the market’s attention in the morning.
Thursday afternoon saw relatively strong at the scheduled auction of 30yr Treasury bonds. In general, strong auctions put downward pressure on yields/rates, all other things being equal. The present example was worth roughly the same amount of improvement as the Jobless Claims data.
While the bond market was already pushing back in the other direction on Friday morning, the Consumer Sentiment data kept things moving in the same unfriendly direction. This was not the usual case of stronger economic data pushing rates higher. In fact, headline consumer sentiment was much lower than expected.
Rather, it was a component of the report that measures consumers’ inflation expectations. This came in much higher than expected, and higher inflation is a much bigger consideration for rates at the moment.
Who cares what consumers think about inflation anyway? It’s not like they decide the price of “stuff.” True as that may be, consumer expectations play a role in purchasing behavior which, in turn, influences demand-driven changes in inflation. It’s not a perfect relationship, but there’s strong general correlation over time.
But the inflation data everyone’s waiting for is right around the corner, and this brings us to the other part of the reason that higher volatility is a lock for the coming week. On Wednesday, May 15th, the latest Consumer Price Index (CPI) will be released.
No other economic report has been as likely to cause big swings in financial markets recently. It is the first, broad, official look at inflation on any given month and, again, inflation is the biggest problem for rates these days.
Q1 inflation proved to be persistently higher than expected–a fact that coincides with interest rates moving up a fair amount from the lows seen at the end of 2023.
Some experts think the trend of elevated inflation will continue while others still expect it to start calming down any month now. With each new CPI, we get another chance to see a sign of a friendly shift. Granted, one month of data won’t work any miracles, but the market is very sensitive to the mere possibility of a shift.
There will be other economic data as well, including Retail Sales and several housing related reports, but there is no doubt about the main event. Incidentally, both Retail Sales and CPI will be released at the same time, 8:30am ET, on Wednesday morning.
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(NEXSTAR) – Despite persistently-high mortgage rates, home prices in U.S. metro areas continue to rise in 2024, new data shows.
Over 90% of metro markets have seen gains in the first quarter of the year, according to the National Association of Realtors, with Illinois taking six of the top 10 spots. The highest year-over-year jump was in Fond du Lac, Wis. (23.7%), with Kankakee, Ill. (22%); Rockford, Ill. (20.1%); Champaign-Urbana, Ill. (20%); and Johnson City, Tenn. (19.3%) rounding out the top five.
Illinois low-income utility assistance programs may get renewed due to bill
The spike in prices in those areas happened as the 30-year fixed mortgage rate ranged from 6.60% to nearly 7%, data from the Federal Reserve Bank of St. Louis shows.
“Astonishingly, greater than 90% of the country’s metro areas experienced home price growth despite facing the highest mortgage rates in two decades,” said NAR Chief Economist Lawrence Yun. “In the current market, rising prices are the direct result of insufficient housing supply not meeting the full demand.”
In February, 2024 a Zillow report found that the U.S. now has 550 “million-dollar” cities where the average home value is at least $1,000,000. That’s up from 491 at the same time in 2023.
Looking at metropolitan areas – which can include several cities – we see some regions jumping 20% or more year-over-year.
Rank
Metro Area
YOY Increase
1.
Fond du Lac, Wis.
23.7%
2.
Kankakee, Ill.
22.0%
3.
Rockford, Ill.
20.1%
4.
Champaign-Urbana, Ill.
20.0%
5.
Johnson City, Tenn.
19.3%
6.
Racine, Wis.
19.0%
7.
Newark, N.J.-Pa.
18.8%
8.
Bloomington, Ill.
18.5%
9.
New York-Jersey City-White Plains, N.Y.-N.J.
18.4%
10.
Cumberland, Md.-W.Va.
18.2%
(NAR)
When it comes to the overall home price, California markets made up eight of the top 10 most expensive, led by San Jose-Sunnyvale-Santa Clara, Calif. ($1,840,000; 13.7%), Anaheim-Santa Ana-Irvine, Calif. ($1,365,000; 14.2%) and San Francisco-Oakland-Hayward, Calif. ($1,300,000; 14%).
“The expensive markets in the West, where home prices declined last year, are roaring back,” Yun said. “Price dips in that region were viewed as second-chance opportunities by many buyers.”
The two non-California markets in the top 10 were Urban Honolulu, Hawaii ($1,085,800; 5.5%); and Naples-Immokalee-Marco Island, Fla. ($850,000; 9.4%).
Kiavi, one of the nation’s largest private lenders for residential real estate investors, closed a $300 million unrated securitization of residential transition loans (RTLs), the company announced on Friday.
The loans bundled in the securitization were mostly investment property loans used for fix-and-flip transactions. This securitization marked Kiavi’s 17th such transaction and elevated the company’s total issuance to more than $4.3 billion since it launched its securitization program in 2019.
The deal drew significant interest from institutional investors. Consistent with prior transactions, investors will benefit from a two-year revolving period during which they can reinvest their principal payoffs to purchase additional newly originated loans.
Barclays Capital was the sole entity responsible for structuring the deal. Barclays, Nomura Securities International and Performance Trust Capital Partners were joint bookrunners and co-lead managers on the transaction.
“This additional capital fuels our continued growth, enabling us to help even more real estate investors scale their businesses,” Arvind Mohan, CEO of Kiavi, said in a statement. “Because of our advanced data models, technology platform, and consistent track record of performance, we continue to see significant institutional demand for Kiavi’s RTL assets.”
The deal followed on the heels of a $350 million securitization by Kiavi in March. The lender also reported that it originated $1.66 billion in fix-and-flip and bridge loans in the first four months of 2024, a 40% increase over the same period in 2023, and it recently expanded into construction financing.
Flight to quality, also known as flight to safety, is when investors shift their assets away from riskier investments — like stocks — into conservative securities – like bonds. This reaction often occurs during turbulent times in the economy or financial markets, and investors want to put their money into relatively safe assets.
Because flight to quality is a term that’s often thrown around in the financial media, investors need to know what it is and how it can potentially impact an investment portfolio. A flight to quality is a short-term trading strategy that might not be ideal for long-term investors. But it’s still important for investors to know how the broader trend may affect the financial markets.
What Causes Flight to Quality?
Economic uncertainty is why investors look to reorient their portfolios away from volatile investments to conservative ones. Moments of economic uncertainty that spook investors can arise for various reasons, including geopolitical conflict, a sudden collapse of a financial institution, or signs of an imminent recession.
A flight to quality usually refers to a widespread phenomenon where investors shift their portfolio asset allocation. This large-scale change in risk sentiment can generally be seen in declines in stock market indices and government bond yields, as investors sell risky stocks to put money into more stable bonds.
Though a flight to quality usually refers to a herd-like behavior of most investors during economic uncertainty, individual investors can make a similar move at any time, depending on their risk tolerance and specific financial situation.
💡 Quick Tip: How to manage potential risk factors in a self-directed investment account? Doing your research and employing strategies like dollar-cost averaging and diversification may help mitigate financial risk when trading stocks.
What Are the Effects of Flight to Quality?
During periods of flight to quality, investors tend to trade higher-risk investments for lower-risk ones. This shift commonly results in a decrease in the price of high-risk assets and boosts the price of lower-risk securities.
As mentioned above, investors can see one effect of a flight to quality in the price of major stock market indices and bond yields, as the market shifts money from the risky stocks to safer bonds.
But a flight to quality doesn’t mean that investors will necessarily shift out of one asset (stocks) into another (bonds). For example, investors worried about the economy might sell growth stocks in favor of more reliable value or blue-chip stocks, pushing the price of the growth stocks down and boosting the price of the blue chips.
💡 Recommended: Value vs. Growth Stocks
A flight to quality may also shift investment from emerging market stocks to domestic stocks or from corporate bonds to government bonds.
In addition to moving funds from stocks to bonds or other assets, investors may also move money into cash and cash-equivalent investments, like money market funds, certificates of deposit, and Treasury bills, during periods of economic uncertainty.
Real-World Example of Flight to Quality
A flight to quality occurred during the early stages of the COVID-19 pandemic and related economic shutdowns in 2020. Investors scrambled to figure out their portfolio positions in the face of an unprecedented global event, selling stocks and putting money into relatively safe assets.
The S&P 500 Index fell nearly 34% from a high on Feb. 19, 2020, to a low on Mar. 23, 2020, as investors sold off equities. But investors didn’t rush to put this money into high-grade corporate and government bonds, as many would have thought in a regular flight to quality. A record $109 billion flowed out of fixed-income mutual funds and exchange-traded funds (ETFs) during a single week in March 2020. Instead, investors moved capital into cash and cash-like assets during this volatile period in a desire for liquidity.
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The Takeaway
A widespread flight to quality that creates volatility in the financial markets can be scary for many investors. When you see decreases in a portfolio or 401(k), it can be tempting to follow the broader market trends and shift your asset allocation to safer investments. However, this is not always the best choice, especially for investors trying to build long-term wealth.
Flights to quality have happened in the past (such as during the early stages of the pandemic in 2020), and will, in all likelihood, happen again. But even if you don’t get caught up in it, it’s good to know what’s happening in the markets, and why.
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The following should be prefaced with the reminder that it is impossible to predict the future with much precision when it comes to bond market movement. That said, there are times when certain outcomes are far less surprising than others on any given day or week. For the current week, that base case involved a flat trajectory with lower volatility than the previous week, and that’s exactly what we’ve seen. This is also an entirely reasonable outcome given the extreme absence of economic data and other big ticket market movers.
Mortgage rates did well last week, making it almost halfway back to the lower levels seen on April 9th. Why focus on April 9th? That was the last day before the most recent Consumer Price Index (CPI).
Why focus on CPI? That’s the monthly economic data that matters most to rate movement these days. It’s not the only game in town, but it caused the biggest recent jump, by far.
Last week’s combination of economic data and reassurance from the Fed was enough to get rates headed back in a friendly direction. There was some follow-through today, but not for any news reasons.
In fact, “reasons” for rate movement are in far more limited supply this week. In other words, last week was good and we caught a small break today with the modest improvement in rates, but things could be more choppy and sideways for the rest of the week.
The refi market continues to be anemic as higher rates are persisting, with refi volume dropping 3.4% compared to the prior month. Seven of the top nine lenders recorded gains in April, with Plaza Home Mortgage, Liberty Reverse Mortgage/PHH and Guild Mortgage standing out for their gains between 36% and 48%.
When asked about whether or not these gains lead to overarching optimism for the direction of the industry or if caution should remain, RMI President John Lunde said he’d split the difference.
“I’ll call it cautious optimism,” he said. “Nothing we’ve seen recently suggests rampant growth, but if we can manage steady gains that would be a big step in the right direction.”
H4P gains are particularly encouraging, which likely stems from renewed industry attention likely brought about by rule changes announced in 2023 and 2024 by the Federal Housing Administration (FHA).
“I do think there’s more focus and attention on it this year with the changes by FHA, which gives originators a reason to take a fresh approach and energy into that niche,” he said.
When asked about where refi business is still taking place despite high rates and falling share of total volume, Lunde said it comes down to the concentration of home price appreciation in a given area of the country.
“Refi is generally going to happen where home price appreciation has been the strongest for the past several years, which can outpace the decline in principal limit factors from higher interest rates,” he said. “I’d expect to see these endorsements continue to whither though, as the recent increase in the 10-year CMT took away the benefit of the declines in the fourth quarter.”
As for what industry professionals should be keeping in mind, purchase may be the name of the game in the near future, Lunde said.
“I continue to think it’s all about purchase business, and getting in front of borrowers that are looking at a forward mortgage right now,” he said. “In many cases, reverse-eligible borrowers will see a lot more benefit for their financial goals from a reverse than a new forward or HELOC.”
HMBS issuance
The top HMBS issuer for April was Finance of America Reverse (FAR), which will soon consolidate under the overarching Finance of America brand. It created $155 million in new issuance, outdoing its March figure by $15 million. Longbridge Financial increased its own issuance to $107 million, while Liberty Reverse Mortgage/PHH and Mutual of Omaha Mortgage jumped to $95 million and $88 million, respectively.
“April’s original (first participation) production of $322 million was $54 million higher than March’s $268 million, though lower than that of April 2023, when approximately $379 million in original new HMBS pools were issued,” New View said in one of its two HMBS commentaries.
When asked about HMBS performance for the month, New View Partner Joe Kelly said that while performance is improved, “it’s not much of a bounce back but a period of relative stability and tightening spreads helps.”
A healthier first-participation pool market — in this case 20 of the month’s 89 pools — could be a good sign for the industry, but it largely “remains to be seen,” he said. “There is enough so far to keep reasonable liquidity and pricing.”
Mandatory purchase of HMBS loans out of pools — required when a loan reaches 98% of its maximum claim amount (MCA) — is generally stable, at least relatively speaking, Kelly explained, according to data shared in a second commentary. The payoff rate for April beat the 12-month average, and when asked how that factors into overall HMBS market health, Kelly explained the benefits.
“Payoff rates have stabilized at a lower rate for non-assignment payoffs,” he said. “The reduction in refinancing risk has had a beneficial effect on overall pricing.”
In terms of trends that New View is observing now, Kelly said that prepayments and losses are tracking low versus historical averages, which is largely healthy for the market. He added that he cannot “recall a time when there were so many proprietary reverse mortgage issuers.”
Lower interest rates allowed mortgage activity to rise modestly during the week ended May 3. It was the first increase in three weeks. The Mortgage Bankers Association said its Market Composite Index, a measure of the volume of mortgage applications, rose 2.0 percent on a seasonally adjusted basis compared to the prior week and 3.0 percent before adjustment.
The Refinance Index increased 5.0 percent from the prior week but was 6.0 percent lower than the same week one year ago. The refinance share of mortgage activity increased to 30.6 percent of total applications from 30.2 percent the week before.
The Purchase Index ticked up 2.0 percent on both an adjusted and unadjusted basis but was still 17.0 percent lower than the same week in 2023.
“Treasury rates and mortgage rates fell last week on the news of a slowing job market, with wage growth at the slowest pace since 2021, and the Federal Reserve’s announced plans to ease quantitative tightening in June and to maintain its view that another rate hike is unlikely. The conventional 30-year rate dropped 11 basis points, and the FHA rate fell 17 basis points to 6.92 percent, back below 7 percent for the first time in three weeks,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. “Mortgage applications increased for the first time in three weeks, with refinances up 5.0 percent. Even with the increase, which included a 29 percent jump in VA refinances, refinance application volume remains about 6 percent below last year’s already low levels.”
Fratantoni added, “Driven by a 5 percent gain in FHA applications, purchase activity was up 2 percent. First-time homebuyers account for roughly half of purchase loans, and the government lending programs are an important source of financing for these homebuyers. The gain in FHA activity is a sign that this segment of the market is active.”
Other Highlights from MBA’s Weekly Mortgage Application Survey
After declining for four straight weeks, loan sizes jumped higher. The average loan was $385,600, up from $375,200 while the size of a purchase loan rose $436,000 to $443,200.
The FHA share of total applications increased to 12.9 percent from 12.7 percent and the VA share increased to 11.7 percent from 11.3 percent. USDA applications retained the usual 0.4 percent market share.
The 11-basis point decline in the conforming 30-year fixed-rate mortgage (FRM) rate brought it down to 7.18 percent. Points were unchanged at 0.65.
Jumbo 30-year FRM had a rate of 7.31 percent compared to 7.39 percent. Points remained at 0.46.
The average rate for 30-year FRM backed by the FHA dropped to 6.92 percent from 7.09 percent,with points decreasing to 0.91 from 0.98.
Fifteen-year FRM rates averaged 6.60 percent with 0.59 point. The prior week the average was 6.74 percent and 0.63 point.
The rate for 5/1 adjustable-rate mortgages (ARMS) was unchanged at 6.60 percent,with points decreasing to 0.65 from 0.75.
ARM applications accounted for 7.7 percent of the total compared to 7.8 percent a week previous.
The Bank of England has kept interest rates at a 16-year high for at least another month, as governor Andrew Bailey said Threadneedle Street would not bow to political pressure to cut rates.
The BoE’s Monetary Policy Committee (MPC), announced its latest decision at midday on Thursday, opting to keep the current rate of 5.25 per cent – set last August – in a blow to those hoping for the first reduction since 2020.
High interest rates have saddled homeowners with soaring mortgage repayment costs, and are used as a tool to help bring down inflation.
While the rate of Consumer Prices Index (CPI) inflation fell to 3.2 per cent in March, experts had suggested that two key economic indicators – pay growth and services sector inflation – have remained more stubborn.
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In positive news, the Bank improved its forecasts on Thursday to predict that CPI inflation would fall to 2.25 per cent next year and to 1.5 per cent in 2026, and said it expected the UK economy to grow by 0.5 per cent this year and 1 per cent in 2025 – slightly higher than previous predictions.
Key Points
Breaking: Bank of England holds interest rates at 5.25%
Governor Andrew Bailey says Bank will not bow to political pressure
Inflation will fall to 1.5 per cent within two years, Bank forecasts
Pay growth and services sector inflation remain stubborn
Voices: Improving the economy may limit a Tory wipeout, but it won’t save Rishi Sunak
16:02 , Andy Gregory
We’re pausing updates on the liveblog for this evening, thanks for following here.
You can read our latest reporting on the Bank of England’s announcement by clicking here, or else keep scrolling to catch up on the day’s events as we reported them.
Chancellor Jeremy Hunt said the Bank of England’s decision on rates was “finely balanced”.
Asked if he had been hoping rates would be cut ahead of the general election, Mr Hunt said: “I welcome the fact the Bank of England’s obviously thought about this very hard, they take this decision independently.
“And I would much rather that they waited until they’re absolutely sure inflation is on a downward trajectory than rush into a decision that they had to reverse at a later stage.
“What we want is sustainably low interest rates, and I think what’s encouraging is that the Bank of England governor, for the first time, has expressed real optimism that we’re on that path.”
Bank of England will not wait for US Federal Reserve to cut rates, says Bailey
14:59 , Andy Gregory
The Bank of England will not wait for the US Federal Reserve to move on interest rates before it decides to cut rates in the UK.
Andrew Bailey, governor of the Bank of England, said: “There is no law that the Fed has to go first. Moreover, we have a remit and a target that is related to domestic inflation in the UK.”
He added that the Bank will always “take the rest of the world into consideration”, but only in regard to how it affects domestic inflation.
“But there’s no law which says we can only move after the Fed moves. That is not something that ever gets discussed in the MPC.”
Bank of England ‘getting very close’ to first rate cut since 2020, says economist
14:41 , Andy Gregory
James Smith, ING developed markets economist, said: “The Bank of England is getting very close to its first rate cut. That much is clear from the latest policy statement which, while keeping rates on hold at 5.25%, has a distinctly more optimistic flair.
“It echoes recent comments from governor Andrew Bailey, who has been hammering home the message that the UK’s inflation outlook is quite different to the US.
“We’re still leaning slightly more towards an August start date for rate cuts, though it’s a close call. What isn’t in doubt is that the Bank is comfortable with moving ahead of the US Federal Reserve.”
Bank of England will not bow to political pressure to cut rates, says Bailey
14:22 , Andy Gregory
The Bank of England will not bow to increased pressure from politicians to cut interest rates, its governor has said.
Andrew Bailey said: “We are an independent central bank. We have a very clear remit. It’s our duty to exercise our duty at all times. When we are sitting in a room as the Monetary Policy Committee, we never discuss politics … It isn’t a consideration in that respect.”
It comes amid a period of heightened pressure from some MPs on the Bank to move faster on rate cuts in the run-up to a general election later this year.
When pressed on whether an upcoming election could influence how the Bank makes its decisions on rates, Mr Bailey added: “We will take the decisions at each meeting which are consistent with our remit. That’s our job and we will do our job.”
Inflation to fall before rising slightly before end of year, says Bank
14:04 , Andy Gregory
The Bank of England has predicted that lower oil and gas prices mean that inflation is likely to drop to around 2 per cent in the coming months before rising slightly before the end of the year.
Inflation could fall noticeably below target without rate cuts, says Bailey
13:52 , Andy Gregory
Here are more comments from Bank of England governor Andrew Bailey.
He told reporter: “It’s likely that we will need to cut bank rates over the coming quarters and make monetary policy somewhat less restrictive over the forecast period, possibly more so than currently priced into market rates.
“This will be consistent with ensuring that inflation does not fall noticeably below target at the end point of the forecast.”
Pound falls against the dollar
13:35 , Andy Gregory
The pound fell against the US dollar and euro after the Bank of England signalled growing support for an interest rate cut among policymakers.
Sterling fell 0.3 per cent to $1.246 and was 0.2 per cent lower at €1.161.
Financial markets more pessimistic than Bank of England, Bailey indicates
13:17 , Andy Gregory
Andrew Bailey has indicated that the financial markets are more pessimistic about the path for lowering interest rates than the Bank of England.
“With the progress we’ve made, to make sure inflation stays around the target, it is likely that we’ll need to cut bank rates in the coming quarters, possibly more so than is currently priced into markets,” he said.
The Bank governor said the committee has “no preconceptions” about how far and how fast it can lower interest rates, and it make a judgment based on the economic data it sees before each meeting.
Visualised: How have interest rates changed over time?
12:58 , Andy Gregory
The below graph shows how interest rates have changed over the past decade:
Bank has not ruled out cutting rates next month, says governor
12:49 , Andy Gregory
The Bank of England has not ruled out cutting rates at its next Monetary Policy Committee decision.
Andrew Bailey, governor of the Bank, said that upcoming economic data would be key to helping the MPC decide whether to cut rates on 20 June.
He said: “Before our next meeting in June, we will have two full sets of data – for inflation, activity and the labour market – that will help us in making that judgement afresh.
“But, let me be clear, a change in bank rate in June is neither ruled out nor a fait accompli.”
Full report: Bank of England holds base rate for ninth consecutive month
12:20 , Andy Gregory
The Bank of England has kept interest rates on hold at 5.25 per cent for the ninth month in a row.
My colleague Jane Dalton has more in this report:
Bank of England holds interest rates at 5.25% despite hopes of cut
Inflation will fall to 1.5 per cent within two years, Bank of England forecasts
12:14 , Andy Gregory
The Bank of England has projected that inflation will fall more than previously thought over the coming years – dropping below its 2 per cent target to 1.5 per cent in 2026.
Headline CPI inflation is expected to fall below the Bank’s 2 per cent target between April and June, but rise again to 2.6 per cent in the second half of this year as the impact of recent drops in energy prices fades.
In the longer term, the Bank dropped its projections for CPI inflation to 2.25 per cent for 2025 and 1.5 per cent in 2026, down 0.25 and 0.5 percentage points respectively on the Bank’s February estimates.
The projection came in the Bank’s May Monetary Policy Committee (MPC) report, which signalled optimism from recent falls in retail inflation. The report said persistently high interest rates had helped push headline inflation down.
Bailey signals optimism that Bank could soon cut rates
12:10 , Andy Gregory
Governor Andrew Bailey has signalled optimism that the Bank of England could soon cut rates.
The Bank’s Monetary Policy Committee voted by a majority of seven to two to keep rates unchanged – with members Dave Ramsden and Swati Dhingra voting to cut rates by 0.25 percentage points.
Mr Bailey said: “We’ve had encouraging news on inflation and we think it will fall close to our 2 per cent target in the next couple of months.
“We need to see more evidence that inflation will stay low before we can cut interest rates. I’m optimistic that things are moving in the right direction.”
The MPC indicated it is still looking for more progress on factors including services inflation and wage growth, which have remained persistently high at about 6 per cent, before cutting rates.
Bank of England expects economy to grow by 0.5% this year
12:08 , Andy Gregory
The Bank of England said it expects the UK economy to grow by 0.5 per cent this year and 1 per cent in 2025 – slightly higher than previous predictions.
Breaking: Bank of England holds rates at 5.25 per cent
12:01 , Andy Gregory
The Bank of England has opted to keep interest rates at a 16-year high of 5.25 per cent – confounding hopes of the first base rate cut since 2020.
We’ll bring you more updates here as we get them.
BoE chief unlikely to give clear signal on when interest rate cut could come, economist predicts
11:08 , Andy Gregory
Bank of England chief Andrew Bailey is unlikely to give a clear signal on exactly when the bank’s first interest rate cut since 2020 might come – but focus will be on what guidance he does give and if more than one member of the Bank’s Monetary Policy Committee votes for a cut this time around, according to Pimco economist Peder Beck-Friis.
“We know from history that policy meetings may create some volatility,” Mr Beck-Friis said.
“What is also interesting is that we have come from a few years where monetary policy has been very correlated globally … but as the pandemic shocks fade I think it is natural that we see some divergence,” he added – pointing to how Sweden and Switzerland had already cut rates while the US may need to wait longer.
Pound falls against US dollar
09:23 , Andy Gregory
The pound edged lower against the US dollar this morning ahead of the Bank of England’s policy meeting, with the central bank expected to hold rates steady but flag when it intends to lower the cost of borrowing.
According to LSEG data, money markets are pricing in an almost 95 per cent chance that the Bank will hold its benchmark interest rate at 5.25 per cent – the highest since 2008. But investors will be watching for signs of when the first interest rate cut in four years will come as inflation falls.
Markets now see a 56 per cent chance of such move in June – when the European Central Bank has already signalled it will reduce borrowing costs, and a greater chance of 72 per cent of a BoE rate cut in August.
London stocks waver ahead of Bank of England announcement
08:40 , Andy Gregory
London stocks wavered this morning as investors turned cautious ahead of the Bank of England’s interest rate decision – while energy shares gave a boost to the benchmark index.
As of 7:17am, the blue-chip FTSE 100 edged up 0.1 per cent at 8,357.85, hovering below its record high of 8,365.28 points. The mid-cap FTSE 250 edged lower by 0.1 per cent.
The pound slipped against the US dollar and the UK’s benchmark 10-year gilt yield was at 4.155 per cent ahead of the decision.
Investors avoided big bets ahead of Threadneedle Street’s interest rate decision due at 11am, where the central bank is widely expected to keep borrowing costs steady.
Bank of England to shed more light on its predictions for the economy today
06:00 , Maryam Zakir-Hussain
The Bank of England will shed more light on its predictions for the economy and the path of interest rates when it publishes the latest Monetary Policy Report alongside the rates decision today.
Meanwhile, the central bank in the US, the Federal Reserve, said on Wednesday it was keeping its key interest rate at the same level and noted a “lack of further progress” towards lowering inflation.
It means rates could stay higher for longer until there is firmer evidence of price rises easing, its chairman Jerome Powell suggested.
04:00 , Maryam Zakir-Hussain
Andrew Goodwin, chief UK economist for Oxford Economics, said: “The data published in mid-April for services inflation and private sector regular pay growth has likely extinguished any remaining hopes of a move in May.
“Though both measures have continued to fall, progress has been slightly slower than the MPC anticipated, and they are currently running marginally higher than the forecasts published in February’s Monetary Policy Report.”
He said it is likely to be a “close call” on whether the MPC decides to cut rates in June or August.
02:00 , Maryam Zakir-Hussain
Higher interest rates are used as a tool to control inflation, which has fallen sharply in recent months.
The latest official figures showed that Consumer Prices Index (CPI) inflation slowed to 3.2% in March, as it edges closer to the Bank’s 2% target.
But economists think the Bank’s policymakers will want to hold out until they are more convinced that inflationary pressures have eased.
Mapped: Which areas worst hit by mortgage rate hikes as homeowners ‘forced to move’
Thursday 9 May 2024 00:00 , Maryam Zakir-Hussain
Homeowners coming off fixed rate mortgages faced huge rises in their monthly payments, latest figures have revealed, with the costs severely biting into household disposable income.
With the Bank of England base rate rising to 5.25 per cent in the summer of last year, families faced soaring mortagage rates with the average two-year fixed rate reaching 6.9 per cent.
The new rates meant many homeowners, especially those with large mortgages still to pay, faced challenging increases in monthly payments.
Mapped: Areas worst hit by mortgage rate hikes as homeowners ‘forced to move’
Bank of England not yet ready to cut UK interest rates, experts say
Wednesday 8 May 2024 21:57 , Maryam Zakir-Hussain
UK borrowers eager for costs to come down may have to wait a little longer before interest rates take a dip.
The Bank of England’s Monetary Policy Committee (MPC), which sets the level of UK interest rates, will announce its latest decision on Thursday.
However, economists are widely expecting the committee to keep rates at the current level of 5.25 per cent, which it has been held at since August last year.
Bank of England not yet ready to cut UK interest rates, experts say
Wednesday 8 May 2024 19:18 , Maryam Zakir-Hussain
Philip Shaw, chief economist at Investec, said: “This broad direction illustrates that collectively the committee is moving gradually towards a rate cut.
“It seems unlikely though to be ready to bite the bullet just yet and the Bank rate looks set to remain on hold at 5.25% for the sixth consecutive meeting.”
He added that it is possible that a second member of the MPC will switch to the “easing camp” and vote for a cut on Thursday.
‘Too early’ for economists to cut rates, economists predict
Wednesday 8 May 2024 17:30 , Maryam Zakir-Hussain
Economists think the Bank of England’s policymakers will want to hold out until they are more convinced that inflationary pressures have eased.
Laith Khalaf, head of investment analysis at AJ Bell, said: “It is almost certainly too early for the Bank of England to pull the trigger on a rate cut right now, especially against the backdrop of a more hawkish US central bank.”
The US Federal Reserve said last week it was keeping its key interest rate at the same level and noted a “lack of further progress” towards lowering inflation.
It means rates could stay higher for longer until there is firmer evidence of price rises easing, the Fed’s chairman Jerome Powell suggested.
Mr Khalaf said the Bank is also likely to be influenced by the European Central Bank, which is widely expected to cut rates in early June.
“The other important factor is more inflation readings for April and May, where CPI could get very close to, or possibly even hit, the Bank’s 2% target,” he added.
“The closer the inflation dial gets to 2%, the greater the pressure on the Bank of England to take its foot off the brake and cut rates.
“Markets currently think it’s a coin toss whether we get a UK rate cut in June, but this rises to a three in four chance priced in by August.”
The housing market has turned – so what does that mean for buyers and sellers waiting to make a move?
Wednesday 8 May 2024 16:29 , Maryam Zakir-Hussain
House prices are down and mortgage costs are up, writes James Moore. So how long will buyers and sellers need to wait before the market shows signs of life?
Britain’s housing market has turned hostile again, at least for sellers. The latest Nationwide index showed a surprise 0.4 per cent fall in April, the second month-on-month decline in a row.
A rival index produced by Halifax recorded a 1 per cent month-on-month fall in March, with the next update due next week. These indices can be volatile, but another fall would now be the betting favourite.
Read more here:
House prices are falling – but what does it mean for the future market?
Improving the economy may limit a Tory wipeout, but it won’t save Rishi Sunak
Wednesday 8 May 2024 15:47 , Maryam Zakir-Hussain
Thanks to the Liz Truss mini-Budget disaster, the Conservatives can no longer claim to be the party of economic competence, writes Andrew Grice. But an election campaign based on the economy is still their best hope of avoiding annihilation:
Improving the economy will not save Rishi Sunak
Pay growth and services sector inflation remain stubborn
Wednesday 8 May 2024 15:45 , Maryam Zakir-Hussain
Interest rates are used as a tool to help bring down UK inflation, which has fallen sharply from the highs hit in 2022 when energy costs spiked and the cost-of-living crisis was at its peak.
The rate of Consumer Prices Index (CPI) inflation fell to 3.2 per cent in March, according to the latest official figures.
But experts suggested that two key economic indicators for the Bank of England – pay growth and services sector inflation – have remained more stubborn.
Average wages continued to increase faster than the rate of inflation last month.
Bank of England not yet ready to cut UK interest rates, experts say
Wednesday 8 May 2024 15:43 , Maryam Zakir-Hussain
UK borrowers eager for costs to come down may have to wait a little longer before interest rates take a dip.
The Bank of England’s Monetary Policy Committee (MPC), which sets the level of UK interest rates, will announce its latest decision on Thursday.
However, economists are widely expecting the committee to keep rates at the current level of 5.25 per cent, which it has been held at since August last year.
This means that there could still be some time before the pressure of the cost of living begins to ease.
Bank of England not yet ready to cut UK interest rates, experts say