4th straight interest rate hold – reaction

The Bank of England Monetary Policy Committee has voted to hold interest rates for the fourth month in a row with a majority of 6–3. Despite two members voting to increase the base rate by 0.25% and one voting to reduce it by 0.25%, the rate remains at 5.25%.

Following a mixed week in which December transaction stats showed a 20% fall year on year, set against a rise in mortgage advances there might have been clamour for a reduction to give the property market a kick start in 2024. But with the unexpected rise in inflation reported earlier in January, it seemed unlikely, despite a recent fall.

Foxtons CEO, Guy Gittins, commented:

“A freeze on interest rates since September of last year resulted in 2023 finishing with a far higher degree of mortgage market positivity than many had forecast and it’s now clear that this positivity has carried over into 2024. We’ve already seen a promising start to the year compared to January last year, as buyers have returned to the market.

“However, the potential now is that mortgage rates could start to climb following a fourth consecutive decision to keep the base rate frozen at 5.25% and we’ve already seen evidence of lenders increasing swap rates in recent weeks in anticipation of today’s news.”

CEO of Yopa, Verona Frankish hopes that we remain at the peak of interest rates adding:

“Today’s decision won’t necessarily add to the property market positivity seen so far this year, but it certainly won’t diminish it either. Whilst the cost of borrowing remains higher than the nation’s borrowers have become used to, they should be reassured that we’ve likely seen the peak where interest rates are concerned and that any future movement will be downwards.”

Jason Ferrando, CEO of easyMoney says:

“The Bank of England has been careful not to run before it can walk where our current economic recovery is concerned and so today’s decision was largely expected despite a sharp fall in inflation this week. This is probably the correct decision and while it won’t immediately ease the burden of the nation’s borrowers, it should help boost sentiment based on the expectation that we could now see a reduction in interest rates on the horizon.”

This should help draw more buyers back to the market and we anticipate that the uplift in market activity seen during the closing stages of last year will continue to build throughout the year ahead.”

Ruth Beeton, Co-Founder of Home Sale Pack, says:

“While it’s reassuring to see continued certainty in the form of a freeze on interest rates, it will do little to boost an otherwise sluggish property market which is in desperate need of stimulation.

Yes, we’ve seen a marginal uptick in mortgage market activity in recent months, however, it remains a challenging environment for buyers and this leading to far longer transaction times, not to mention an increase in the number of sales falling through.

Hopes of a rate cut later in the year should help, but until they do materialise, the property market is likely to plod along in the state of limbo seen for much of the last 12 months.”

In a positive spin on the decision, Co-founder and CEO of GetAgent.co.uk, Colby Short, suggests that the decision to hold the base rate will help stabilise the market.

“Today’s decision to hold the base rate at 5.25% marks six months since the last interest rate hike and the overarching opinion is that we’ve now seen the peak in this respect.

This has helped to stabilise the market and we’ve seen mortgage rates start to reduce, tempting buyers back the fold and increasing mortgage approval numbers in the process.

This has delivered a much needed shot in the arm to the UK property market and it’s now a far more attractive place to be for the nation’s sellers who have been desperately waiting to make their move.”

John Phillips, CEO of Spicerhaart and Just Mortgages said

“Even before the recent surprise news on inflation, my expectation was the Bank of England would sit on the base rate once again – even though it should cut. While there’s no doubt the bank has much to consider, the danger is it takes too long to make a decision and it eventually comes too late.

“Nevertheless, continuity and stability is a positive, especially for those not on a fixed rate deal. While it’s not here yet, a potential cut to base rate on the horizon is certainly helping bring some confidence back to the market, along with continued competition among lenders with rates coming down. We’ve seen this first hand in both our new buyer registrations and in requests for valuations, which are both at their highest point for a number of months.

“With affordability remaining a real stumbling block for many borrowers, it would be fantastic to get to a position where the base rate is improving, lenders are continuing to innovate, and the government is bringing some much-needed support to the housing market. Given recent news and speculation, this may become a reality in the not-too-distant future. Meanwhile, our message to our brokers is to keep supporting clients, stay visible and proactive, and keep highlighting the value of advice – especially as borrowers try to navigate the market.”

Nathan Emerson, Propertymark CEO, adds

“It is positive to see that many people intending to buy their first home or sell their current one won’t be hindered by an increase in interest rates. However, it is now time for the UK Government to continue to curb inflation so that interest rates can fall further to help ease the backlash this has had on people’s affordability. They should make 2024 the year consumers start to enjoy some confidence again following three years of disruption to the economy.”

Mark Tosetti, Group Partnerships Director at Movera, including ONP Solicitors, commented:

It comes as no surprise that the Bank of England has held the bank rate at 5.25% again this month. But it is disappointing that it is only forecasting inflation to fall temporarily to the 2% target in 2024 Q2 before increasing again in Q3 and Q4. However, the announcement has offered some rays of hope in that the MPC’s projections are conditioned on a market-implied path for bank rate that declines from 5.25% to around 3.25% by the end of the forecast period, almost one percentage point lower on average than in the November Report.

“How will this affect the home-moving market? Mortgage rates have been tumbling and, if the Bank of England bank rate falls, we could see more mortgage rates cuts which would be no small relief for both new borrowers, and homeowners looking to remortgage.”

One Response

  1. I am staggered that someone voted to increase it. I am not surprised to see it stay the same, that aligns with the BOE cautious approach which in my opinion has not worked well in the last few years. I think there are buyers out there who have money to spend and they can afford to buy with the higher rates. But they are choosing not to and are choosing to wait until the rates drop. For me that is somewhat foolish. There are too many sellers and not enough buyers. If the buyers that can buy think about it, they can get an extremely good deal on a property at the moment. But when the rates do drop, the market will be flooded with buyers again and prices will increase. So whilst they will be paying less on the mortgage, they will be paying more for the house. I’m staggered that there is not more help for buyers out there who want to take that approach. If a buyer can secure a house for £10k or £20k less than it is on for, surely they are better off doing that than trying to save £50-£100 a month on a mortgage?

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