The Monetary Policy Committee (MPC) of the Bank of England has made the decision to leave interest rates at 5.25%.
It had been previously been expected to raise the base rate from 5.25% to 5.5% but following the unexpected fall in inflation it appears the Bank of England is content that their economic plan is working. The Bank of England Governor Andrew Bailey stated that “inflation has fallen a lot in recent months, and we think it will continue to do so.” The latest figures showed inflation fell to 6.7% in the year to August, down from 6.8% in July.
Just this week two national consumer bodies called on the government to resist further interest rises. Reaction from around the industry was broadly positive. Rightmove’s mortgage expert Matt Smith said that the “surprising decision” to hold rates rather than raise them as expected is “another indication that we may now be at the peak of Base Rate rises”. He added:
“It will be particularly welcomed by those on a tracker mortgage who won’t see a rise in their monthly payments for the first time since December 2021.
Today’s decision to pause rates is positive news for prospective home movers, and it is likely that lenders will continue to reduce rates, as we’ve seen over the last eight weeks, and we may see the pace of reductions increase in the coming weeks.”
Managing Director of House Buyer Bureau, Chris Hodgkinson, commented:
“Despite today’s freeze many of those considering a property purchase are likely to remain sat on the fence while the cost of borrowing remains considerably higher than it has in recent times.
For sellers, this means less interest from buyers, a prolonged transaction timeline and a greater chance that their sale could fall through due to heightened market uncertainty.
The one positive to take is that house prices are yet to show any significant signs of instability and so those who can secure a buyer should still be able to sell for a good price, albeit it may take some time longer to do so in current market conditions.”
John Phillips, CEO of Spicerhaart and Just Mortgages said that brokers will “continue to play a critical role by using all the tools available to help clients make the numbers work”. He continued:
“…whether that’s the many households still set to remortgage or those that need to move. Lenders have played their part in recent weeks to reduce rates considerably and news of stability in interest rates may allow lenders to loosen the purse strings a little further.”
With Andrew Bailey providing little indication that interest rates could come down any time soon Sarah Coles, head of personal finance, Hargreaves Lansdown warned today’s decision “isn’t the full story:”
“The Bank of England made it clear that it’s still locked in a fight against inflation. Rates could go up again in future, and at the very least are expected to hold at this level for a significant period until inflation is under control. It means we’re not expecting seismic shifts, so there are opportunities for those who act fast, and some comfort for those who can’t.”