The Bank of England has once again decided to keep the interest rate at 5.25%, marking the sixth consecutive time this rate has been upheld.
Inflation is currently at 3.2%, which is higher than the Bank’s targeted 2%.
The Bank recently revealed its predictions for future inflation and the overall state of the UK economy.
Bank of England Governor, Andrew Bailey, doesn’t believe it’s the right time to lower interest rates just yet.
He insists on needing further proof of a continued slowdown in inflation before considering a reduction in interest rates.
Bailey is hopeful, stating that inflation is expected to decrease and approach the 2% target within the next few months. He reiterates that clear signs that inflation will remain low are required before cutting rates.
Not everyone on the Bank’s policymaking team agreed with the decision to maintain the current rate; seven voted to hold, while two voted for a reduction.
While a rate cut is not anticipated in the markets until September, some economists predict it could happen sooner.
There’s speculation that the Bank might consider a rate cut as early as June 21 after new data on inflation and wages is available, but August or September seems more probable.
Industry Response:
Nick Leeming, the chairman of Jackson-Stops, supports the Bank’s decision to wait and sees it as an indicator that there may finally be a rate cut after the upcoming meeting in June.
Nick explains that while people with mortgages would prefer significantly lower rates, the current level is not high by historical standards. He suggests that even a small rate cut in June could improve affordability, particularly for those at the lower end of the housing market, and keep property transactions moving smoothly.
Nick adds that the current steady holding of rates helps maintain some positive momentum in the housing market, as evidenced by an increase in viewings, new listings, and buyer interest compared to the previous year within the Jackson-Stops network.
Mark Manning, managing director at Northern Estate Agencies Group, feels a rate cut would have been appropriate given current inflation levels. He recognizes that the Bank is waiting for more definitive signs of a reduction in the cost of living before acting.
Mark notes the recent surge in the market and high demand, which has overwhelmed lenders with applications, leading some to raise mortgage rates. He believes a rate cut by the Bank would prompt lenders to lower their rates and hopes to see a decrease in June to boost market confidence.
Jeremy Leaf, a north London estate agent, mentions the Bank had to make a difficult decision due to conflicting economic indicators. He observes that borrowers are concerned about higher mortgage rates and are anticipating a base rate reduction.
Jeremy points out that while the actual decision to hold rates is significant, insights from the Bank’s discussions and voting patterns can be equally enlightening. He anticipates a future reduction in rates but doesn’t expect it to drastically change property prices or market activity, given the current stagnant market conditions.
Tom Bill, head of UK residential research at Knight Frank, acknowledges improvements in the housing market this spring but notes continued caution among buyers and sellers as they await a rate cut. He suggests that a near-term rate reduction could lower mortgage rates and stimulate demand. Nonetheless, he anticipates a downward trend in house prices with increased mortgage costs, more supply, and the end of sub-2% mortgages for many homeowners. He predicts a 3% rise in UK house prices this year, expecting service inflation to ease and borrowing costs to decrease in the latter half of the year.
Nathan Emerson, CEO of Propertymark, is upbeat about the market adapting to current interest rates aimed at tackling high inflation. He references a report showing increases in potential buyers and available rental properties, signaling recovery from recent economic shocks.
Robin Rathore, CEO of Bamboo Auctions, comments on the fragility of the sector despite the stability provided by holding the base rate. He cites high property transaction fall-through rates and concerns caused by rising mortgage rates. He also notes increased market activity compared to the previous year.
Some homeowners are being forced to sell their properties due to the end of their mortgage terms and increased payments. Quick sales are more likely if the property is priced sensibly. Additionally, there has been a 30% jump in the number of people choosing to sell their properties through online auctions via agent partners, seeking a faster and more reliable sale process.
Adam Feather from Robert Anthony Estate Agents isn’t surprised by the Bank’s decision to keep interest rates steady. However, he notes that there’s a growing call for a rate cut, which could boost the improving property market, especially since inflation seems to be decreasing.
Ryan Davies of Bluestone Mortgages points out that the decision to not lower interest rates disappoints those hoping for some relief in their mortgage payments. The interest rates are the highest they’ve been in 15 years, putting a strain on household finances. He encourages people to seek advice from their mortgage lenders or brokers to explore different options and still be able to afford a home.
Jonathan Bone from Better.co.uk highlights that the base rate staying the same since last August is causing issues for homeowners who want to remortgage and for first-time buyers. Inflation hasn’t decreased as quickly as hoped, leading to higher fixed mortgage rates. Nonetheless, there’s speculation about a potential interest rate cut in the coming months. He warns against remortgaging too soon, as not all lenders will refund valuation fees if better rates appear after a Bank of England rate cut. He suggests consulting a mortgage broker, who can direct you to lenders that don’t charge valuation fees.
The Bank of England is facing pressure to decrease interest rates as mortgage costs are going up.
