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Bank of England Maintains Interest Rate, Impacting Mortgages and Property Market

The Bank of England has chosen to keep its interest rate steady at 5.25%, marking two years since the initial rate increase began on 16 December 2021. With expectations of lower inflation in the upcoming November figures, albeit a modest decline compared to October, the focus shifts towards potential rate cuts and their implications for mortgages.

Sarah Coles, head of personal finance at Hargreaves Lansdown, comments on this development: “This interest rate pause was signposted more impressively than the entrance to a signpost symposium. Unless something wildly unexpected happens, we’ve hit the top of the rate rise cycle, and the question is no longer what will happen next to rates, it’s how long we’re going to wait until we see cuts, and what this means for mortgages. Tracker mortgages will hold steady as they move with the base rate, while fixed-rate mortgages are on a downward trend with the average two-year rate dropping below 6%. The market currently expects Bank of England rate cuts sooner rather than later, which is feeding into cheaper deals.”

Guy Gittins, CEO of Foxtons, observes a positive trend in the property market: “Since the Bank of England first decided to hold rates at 5.25%, mortgage approval numbers have increased, sellers have returned to the market, and UK house prices have consistently climbed on a month-to-month basis. While hopes of a rate reduction were probably a tad optimistic this side of the Christmas period, a third consecutive decision to keep the base rate held will only add to this growing property market optimism.”

Jonathan Samuels, CEO of Octane Capital, offers his insights: “The Bank of England’s strategy appears to be working, with the fall in headline inflation largely driven by a reduction in food and energy prices. Core inflation has proved more stubborn, so the decision to keep the base rate as it is seems sensible, and we expect one made in readiness for a rate reduction in the new year. The effect of holding rates while inflation is falling gives the effect of a rate rise in real terms, which will continue to benefit the economy.”

Bradley Post, CEO of RIFT, and Jason Ferrando, CEO of easyMoney, echo similar sentiments, highlighting the importance of a stable base rate for household borrowing, especially during the high spending period of Christmas. This stability is expected to bolster confidence and provide further stability as 2024 approaches, potentially strengthening the property market.

Chris Hodgkinson, Managing Director of Apex Bridging, notes the positive impact of the rate hold on the UK property market: “A hold on interest rates has helped to stabilise the market and we’ve already seen an uplift in buyer activity, as well as positive monthly house price growth. Today’s decision will only help to steady the ship further, providing buyers and sellers with greater certainty as we approach the new year.”

Susannah Streeter, head of money and markets at Hargreaves Lansdown, adds: “The Bank of England isn’t budging from the summit, keeping rates on hold. Stubborn inflation is still a concern and we may be stuck on this plateau for a while. The descent, when it comes, is likely to be gradual. The timing of any cut will balance between cooling inflation and supporting the economy. Forecasts for the first rate cut range from spring to winter next year, with cuts expected to be fairly sedate. The mortgage and savings markets, however, won’t stand still waiting for something to happen.”