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Bank of England Retains Interest Rates: Reactions and Implications for the Property Market

In a move marking a departure from the trend observed over the past 15 months, the Bank of England has elected to keep interest rates steady at 5.25%.

This decision has sparked conversations among economists, with some speculating that we might be witnessing the culmination of a series of consecutive rate increases, hinting at a potential shift in economic trajectories. The notion of stability in the Bank of England rate, coupled with potential future reductions, has led to anticipations of corresponding reductions in lender rates, as some lenders have already initiated slight reductions.

This stability is generally perceived as a beacon of optimism for the property market, enhancing the ‘feel-good factor’ among the populace, fostering hopes of peaking rates, and foreseeing reductions in the foreseeable future.

Giles Coghlan, Chief Market Analyst consulting for HYCM, scrutinized the intricate dynamics surrounding the decision by the Bank of England. He stated, “There were a lot of moving parts for the Bank of England to contend with going into today’s decision. But, with yesterday’s core print still three times higher than the BoE’s target and wage growth remaining strong, the BoE clearly want to stamp inflation into the ground for good.”

However, he also warned of the repercussions that might surface due to the ‘lag effect’ on interest rate hikes, projecting that the impact of the decision may not manifest for another 9 to 12 months, potentially leading to a period of stagflation and economic constriction.

Nathan Emerson, CEO of Propertymark, viewed the retention as a positive development, saying, “It’s positive to see that the bank rate has remained unchanged this time around and will be reassuring for those looking to enter the housing market especially.”

Jason Ferrando, CEO of easyMoney, echoed sentiments of cautious optimism but reminded that the journey to economic stability is far from over, stating, “Yet another base rate increase may have been viewed as overkill… but it’s fair to say that the job is far from done.”

The Managing Director of House Buyer Bureau, Chris Hodgkinson, indicated that the ongoing heightened market uncertainty means many prospective buyers are likely to remain indecisive, which could potentially prolong transaction timelines and increase the chances of sale fall-throughs for sellers.

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.”

However, Hodgkinson also pointed out a silver lining, suggesting that the current market conditions haven’t showcased any significant signs of instability in house prices, allowing those who can secure a buyer to still potentially sell for a favourable price, albeit within a potentially extended timeframe due to prevailing market conditions.