The Bank of England has held the base interest rate at 3.75%, with the Monetary Policy Committee (MPC) voting for the hold by a majority of 7-2.
The committee said it will continue to closely monitor the situation in the Middle East and its impact on the economy, and stands ready to act as necessary to ensure CPI inflation remains on track to meet the 2% target in the medium term.
In a statement announcing the decision, the MPC said: “Global energy prices have fallen since the previous meeting in response to events in the Middle East. But they remain higher than pre-conflict and have continued to be volatile.
“The impact of the energy shock on the UK economy remains uncertain. Monetary policy cannot influence energy prices but is being set to ensure that the economic adjustment to them occurs in a way that achieves the 2% inflation target sustainably. The policy stance required to achieve this will depend on the scale and duration of the shock, and how it propagates through the economy.”
Property market commentators were broadly positive about the decision, suggesting the hold will calm nerves amongst home movers and lead to an increase in demand.
“No news is good news for borrowers and prospective buyers,” said Joe Pepper, UK CEO at PEXA. “With geopolitical tensions easing this week, inflation expectations are being revisited, and we are likely in for a period of interest rate stability rather than rises. This should support market activity as we head into the summer.
“While this is not going to improve housing affordability, we are likely to see buyers’ nerves calmed, and demand improve. If inflation does start to recede in the longer-term, rates will resume their downwards trajectory. Either way, the market needs to be ready to cope with a spike in demand as pent-up demand is uncorked.”
Andrew Lloyd, managing director at Search Acumen, said: “An interest rate hold and falling bond markets is exactly what borrowers needed this week. Signalling a move to stability, mortgage lenders are likely to offer competitive deals off the back, that might help nudge buyers along.
“Importantly, interest rates alone won’t stop the economic malaise that seems to have overtaken the UK. The market is being drained of energy by political inertia. I’m hearing the same story of 60 people tracking a single property – yet no viewings, no offers. Until we thaw the market, price signals will stay distorted.
“We’ll need a sustained decrease in inflation to stop Bank of England policymakers feeling rattled. That will require stability in the Middle East and a path to ending trade disruption. This is a stark reminder of how exposed the UK economy is to global shocks. You can see it in markets too, where US dominance, especially in big tech, continues to set the pace.”
Nathan Emerson, CEO at Propertymark, said the decision provides a degree of stability and certainty for buyers and sellers. “While borrowing remains relatively expensive compared with recent years, holding rates steady avoids adding further pressure to household budgets and gives the housing market an opportunity to adjust.
“Many families are still recovering from the higher cost of living and elevated energy bills experienced over the past few years. If inflation continues to move in the right direction, there is growing hope that confidence will strengthen, helping to support increased activity across the property market and making home ownership more achievable for many.”
Ben Thompson, director of home moving strategy at Mortgage Advice Bureau, said the second consecutive rate hold provides further reassurance to borrowers and offers a sustained period of stability for buyers and sellers.
He added: “For first time buyers, a hold provides greater confidence when budgeting for mortgage repayments, and may encourage more people to move forward with their home buying plans.
“Our research found that 41% of prospective buyers are waiting for a ‘sign’ before taking the next step, and a sustained period of rate stability could provide some of the reassurance they’ve been looking for.”
Verona Frankish, CEO of Yopa, said: “With inflationary pressures yet to disappear entirely, a measured approach from the Bank of England is understandable and we expect the market to maintain its current level of momentum as a result.”
And Jason Tebb, president of OnTheMarket, said the hold would bring stability. “While interest rate cuts have been hugely important in boosting buyer and seller confidence over the past couple of years, a further hold suggests a continued steadiness and stability which in these uncertain times is no less welcome.”
“With lenders continuing to ease mortgage rates on the back of lower swap rates, there is cause for optimism among borrowers. As ever, many people simply need to move – especially if they have repeatedly put on hold due to pre-budget speculation, and geopolitical concerns – and these are proceeding with their transactions.”
