The Bank of England’s Monetary Policy Committee is expected to hold interest rates at 3.75% when it announces its decision on Thursday, according to a consensus of 65 economists polled by Reuters this month.
The decision comes as mortgage rates have climbed over the past 10 days, driven by volatility in international bond markets that has pushed swap rates to a three-year high. Swap rates determine the pricing lenders use for mortgage products.
Divided committee
At last month’s meeting, three members of the nine-strong MPC voted for an increase, signalling ongoing division within the committee. Huw Pill, the Bank’s Chief Economist and an MPC member, has publicly supported a rate rise, stating: “We cannot wait for uncertainties to resolve themselves before acting.”
Despite this, nearly 90% of economists surveyed expect rates to remain on hold for the rest of the year, with only eight predicting a rise to 4%.
Housing market impact
The uncertainty has affected mortgage approvals, which decreased to 56,100 in July, down 2,100 from 58,200 the previous month, according to Bank of England data. The decline has dampened expectations of a near-term housing market recovery.
Rising mortgage costs have broader implications for the property sector, including market shifts affecting letting agents and purchase timing decisions in cities across the country.
The combination of elevated swap rates and falling mortgage approvals suggests continued pressure on property transactions in the months ahead, with the Bank’s decision this week likely to influence lender pricing strategies and buyer confidence.
