The Bank of England monetary policy committee (MPC) have voted to hold the interest rate at 5,25% today. With inflation falling, and another announcement due next week on latest rate of inflation, many have suggested that interest rates may have peaked.
The clearest indicator of confidence returning to the market is falling mortgage rates. Rightmove’s mortgage expert Matt Smith says that we have seen 20 consecutive weeks of steady average mortgage rate falls which is contributing to a more settled market.
Rightmove’s weekly mortgage tracker has identified that the average 5-year fixed mortgage rate is now 5.07%, down from 5.30% a year ago, with 2 year fixed mortgage rates now 5.48%, down from 5.55% a year ago. The property portal are predicting an uplift in demand from January, boosted by the traditional Boxing Day boost in supply.
“The market opinion remains that Base Rate has reached its peak. The fact that swap rates – the underlying cost of mortgages to lenders – fell further after the latest UK GDP data was published yesterday, was another indicator that the markets were confident about how today’s announcement would play out.
“Many of the factors that contributed to the hold in September and November are continuing, and a flattened Base Rate, which could begin to fall in 2024, is looking increasingly likely. Today’s hold could provide some room for lenders to offer further mortgage rate drops – though it’s likely that lenders may hold back offering these to borrowers this side of Christmas, to take advantage of the seasonal jump in demand that usually happens in January”
In it’s release, the MPC have said that provided the economic targets are met, interest rates will come back down. For Andy Sommerville, Director at Search Acumen, the property data and insight provider, the decision to hold rates now comes as no surprise.
“For the property sector, we expect this decision to maintain the status quo, keeping property prices stable in the short term, but still leaving people feeling tangibly no better off. Though progress has been made to fight the ongoing inflationary pressures, the very high cost of borrowing remains a barrier for homebuyers and real estate investors alike. This, coupled with affordability issues as prices remain high, especially for first-time buyers, means we are unlikely to see growth in either market.
Despite this, steady rates and some stability can provide a sense of reliability in uncertain times. Compared to the consistent increases we have seen previously, this may be settling for some. The aim of the game now is to stop deals falling out of bed before too many external factors take hold. Technology is a ready and waiting solution. It will only be when we significantly digitalise parts of the system and connects these processes that will start to bear fruit. Quicker and more accurate transactions will give our current slow-moving market a boost, whilst also saving both individuals and businesses time and money.”
And echoing many in the property industry, Nathan Emerson CEO Propertymark hopes that the worst of the impact of higher interest rates has passed and some momentum can return to the market. :
“With interest rates remaining unchanged yet again, Propertymark is optimistic the peak of the turmoil has passed, however, it may take a little time to see full momentum and confidence back within the housing market once again.”
“Another hold brings continuity and stability and provides an opportunity for lenders to reassess and reprice. It will no doubt add further ammo to the ongoing rate war among lenders – which is great news for borrowers and prospective buyers.
Adds John Phillips, CEO of Spicerhaart and Just Mortgages.
Held rates is good news for the new year says Nathan Reilly, Director at Twenty7tec,
“In the months when rates are held stable, we might not see the spikes in daily activity we do in months when rates are raised or lowered. But month after month of stable rates is also something that the market can price in and work with, while rates remain high, mortgage holders and potential buyers have ultimately been waiting for stability, which makes this latest hold decision significant for the new year.
“Today’s decision means that people know for at least six weeks what their rates are likely to be, which means we’ll likely see more activity in the new year as buyers really get going again after the Christmas break.”
Kevin Roberts, Managing Director, Legal & General Mortgage Services adds
“Today’s decision by the Bank of England to hold rates steady shouldn’t be seen as the sign of a bleak midwinter, but a season ripe with opportunity. As our market steps into a new normal with average rates running in the region of 4-6% – and closer to pre-pandemic averages – it’s likely that we are looking at rates that are here to stay, and which could be worth committing to. Lenders continue to price products competitively, and just this week, the average two- and five-year fixed rates fell to their lowest level for six months.”
