Base rate held at 5.25%
The Bank of England has opted to hold the base rate at 5.25%, the second consecutive month the Bank opted to hold rates.
The central bank’s Monetary Policy Committee voted six to three to hold interest rates, as the three preferred to hike rates by 0.25%.
Andrew Bailey, Governor of the Bank of England, said: “We’ve held rates unchanged this month, but we’ll be watching closely to see if further rate increases are needed.
“But even if they are not, it is much too early to be thinking about rate cuts.”
John Phillips, CEO of Spicerhaart and Just Mortgages said: “It is encouraging to see the Bank of England continue to hold interests rates, as the markets and the majority of economists expected.
“In reality, it feels like the only logical move as it’s still too soon for any reduction and an increase would just lump further misery and uncertainty on borrowers – especially as the Bank of England itself still doesn’t yet know the full extent or impact of its 14 previous rises.
“While inflation stagnated in September, the general consensus is it will continue its downward trend. In the mortgage market, today’s news will hopefully offer some stability and give lenders the confidence to take a further look at their books and continue to price more competitively. Even so, affordability remains a key blocker preventing many from pushing ahead with plans.
“With the expectation that rates will stay higher for longer, brokers must throw their arms around clients and educate them about the tools available to help make the numbers work and support borrowers of all backgrounds.
“With homeownership still a clear aspiration and a top priority for all the major political parties, it will be interesting to see what will be announced to encourage this important part of the economy as the election campaign gathers pace over the next 12 months. Increasing routes to homeownership, particularly for struggling first time buyers is absolutely critical in the current climate.”
Simon Gammon, managing partner at Knight Frank Finance, said: “Mortgage rates have been easing since late July and are now beginning to plateau. The Bank of England’s decision to hold at 5.25% was largely priced in, and we expect the rate of inflation to be the biggest determinant of whether we see more substantial mortgage rate cuts before the end of the year.
“Typical five-year fixed rates now sit around 4.8%. That may ease to around 4.5% by the year end if the annual rate of inflation dips to 4% – 5%. Most borrowers are currently opting for tracker products, taking the view that, even if the Bank does opt to raise the base rate again, they would like to benefit from cuts to the base rate next year.”
Tom Bill, head of UK residential research at Knight Frank, said: “Despite rates staying on hold again, sentiment in the housing market will remain weak. Inflation will fall but nobody is quite convinced that it’s ‘job done’ for the Bank of England yet.
“The financial pain from higher mortgage rates is still filtering into the system and there is a mood of uncertainty due to next year’s general election and conflict in the Middle East.
“Demand and supply have been subdued, which means this housing market slowdown has been marked by a slump in transactions more than prices. We expect UK prices to fall by 7% this year and 4% next year as inflation comes under control and mortgage rates stabilise.”
Nick Leeming, chairman of Jackson-Stops, said: “The market will take some clarity and comfort from the Bank of England’s decision to hold the base rate at 5.25% today. While international events have added to already challenging conditions and the curtain has firmly fallen on the era of cheap borrowing, monetary policy will not be determined in the long-term by short-term pressures, and quite rightly so.
“For the property market, holding rates steady provides certainty for buyers who remain committed to their property search. The reality is that, while some buyers who wanted to move but didn’t need to will take a step back, house-hunters who need to move are still showing a commitment to go ahead with planned purchases. Persistent demand is why we saw UK house prices rise in October, underpinned by a dearth of supply on the commuter belt and UK coastline.
“This is the final time the Monetary Policy Committee will meet before the Chancellor’s Autumn Statement, when we hope to hear more about the government’s plans for the housing market including possible policy changes and tax cuts.”
Tomer Aboody, director of property lender MT Finance, said: “The Bank of England has wisely held rates on the back of dipping inflation. This should give consumers confidence that inflation is on track to be halved next year, but more importantly it will keep more money in people’s back pockets as they continue to struggle with the high cost of living.
“Uncertainty around interest rates, which are also much higher compared with recent years, does nothing for confidence and is feeding through to lower level of mortgage approvals for both transactions and remortgaging. The market is waiting to see if rates can finally stabilise or potentially fall in the near future, which will improve the ability to finance.
“With base rate appearing to have peaked, the next step is some form of government assistance on stamp duty to incentivise buyers and get the housing market moving.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “Extending the pause in the onslaught of successive rate increases is good news for the property market. In present troubled economic times, stability aids confidence, which is so vital to decision-making when it comes to buying and selling property.
“In our offices, we are finding that many people who want to move are holding off until they see mortgage rates and inflation come down further, with little prospect of further rises.”
Duncan Kreeger, CEO and founder of real estate finance and investment platform TAB, said: “The Bank of England’s decision to maintain the basic rate of interest at 5.25% for a second time brings some much-needed stability to the market and will undoubtedly be a welcome boon for investors, developers, and lenders.
“We’ve seen a noticeable pickup in activity since the previous decision to hold rates, and we hope this positive momentum will continue over the coming months as we all adapt to the changed interest rate environment.
“With lenders taking steps to reduce rates, directly benefiting borrowers and increasing the viability of many projects and purchases, we anticipate this positive shift to ripple across the industry, providing the foundation for a positive Q4 and 2024.”
Ben Thompson, deputy CEO, Mortgage Advice Bureau said: “Today’s hold in interest rates is good news for those with mortgage deals expiring soon, and prospective buyers looking to get onto the property ladder. Another hold is likely a sign that the Bank of England has now concluded this cycle of interest rate hikes. But we mustn’t get complacent. This could very much change in the coming months based on how, and indeed if, inflation continues to fall.
“The mortgage market has already seen drops in the swap rates used to calculate mortgage prices, and there is hope that a second consecutive pause might mean more reductions ahead for homeowners. Prospective buyers and mortgage customers will be relieved by the prospect of a steady rate, and hopefully not too distant reductions in the base rate.
“While there is hope that rates won’t rise again, there is a small chance they will, and action now could be more beneficial in the long run. This could be the sign for many homebuyers to take advantage of stable rates before there are further rises.”
Tony Hall, head of business development, Saffron for Intermediaries, said: “Today’s decision to maintain the base rate is another positive sign that the mortgage market is weathering the broader economic storm.
“This is especially poignant following the decision to stabilise rates in September, suggesting that we may enter the new year with a much more positive outlook than many expected at the beginning of 2023.
“Despite these signs of positivity, borrowers should still seek advice in order to navigate this complex market. Many customers will still be facing challenging financial situations, and the threat of payment shocks remain significant as they adapt to the new interest rate environment.
“Financial advisors can assist clients as they sail through these final choppy waters towards shore, helping customers find the best options available to them and ensuring they can fulfil their homeowning dreams.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “As expected, the Bank of England has made the wise and welcome move to hold base rate again at 5.25%.
“The run of 14 consecutive rate rises before September’s pause have been painful. Today’s decision will raise hopes that base rate has peaked, allowing the dust to settle rather than causing further anxiety and distress for borrowers.
“Borrowers will be wondering what happens next. Those hoping rates will move swiftly downwards could well be disappointed; we expect a period of around six months during which rates will plateau, followed by a gradual reduction in base rate to ‘normalised’ levels of around 3%.
“Many lenders have reduced their fixed rates in the past weeks on the back of calmer Swaps, which underpin the pricing of fixed-rate mortgages. While the days of rock-bottom mortgage rates are long gone, we expect pricing to continue to improve over coming weeks. Although we know a lot can change on the back of negative data, for now the outlook is much more promising than it was just a few months ago.
“However, there is no room for complacency as borrowers due to come off cheap fixes still face a payment shock. It is important to plan ahead as much as possible and act now. Rates can be booked up to six months before you need them so speak to a whole-of-market broker as to what’s available. If when you come to remortgage rates are cheaper, borrowers can choose another deal.”