The mortgage market welcomed the Bank of England’s decision to keep its base interest rate at 3.75% today, saying it would help bring more stability to the housing market.
The bank’s Monetary Policy Committee (MPC) voted 7/2 this morning in favour Keeping the base interest rate at its current level. The two senior members of the Monetary Policy Committee voted in favor of increasing the base rate to 4%.
The decision to pause interest rates came when the Monetary Policy Committee decided that it was necessary to keep inflation under control.
Consumer price index Inflation is now 2.8%With the bank’s target of 2%.
“CPI inflation has fallen to 2.8% since the previous meeting, although it is expected to rise later this year as the effects of rising energy prices persist,” the bank said. “The risk of material second-round effects in setting prices and wages, on which policy should depend, becomes greater the longer energy prices continue to rise.”
“But the labor market remains soft, and signs of a weakening economy may contain inflationary pressures. Interest rates faced by households and businesses remain higher than before the conflict, which will work to reduce inflation over time.”
David Hollingsworth, associate director at L&C Mortgages, said: “Once again holding the base rate will give borrowers more hope that interest rate rises may not need to be as severe as originally feared. Most borrowers have opted for a fixed rate security, but the last few months have seen a growth in the numbers betting on a track rate to not only offer a lower rate initially but potentially remain so.
“Of course, there are no guarantees and markets are still pricing in the possibility of interest rates rising higher, so borrowers must consider how well they can handle higher payments.”
Joshua Elash, founding director of MT Finance, said: “It is encouraging that the MPC kept the policy rate on hold. This was the right thing to do. Increasing it at this stage would have put more pressure on both lenders and borrowers.”
“With a framework for peace between Iran and the United States, we should see some stability return to the mortgage market, as well as an easing of tensions over energy costs.”
Amy Reynolds, head of sales at Richmond estate agency Anthony Roberts, said: “The key interest rate was expected to remain at 3.75% for another month, with the Bank of England moving cautiously despite inflationary pressures.
“This decision will improve the overall mood of buyers, who remain very cautious. People are paying close attention to the situation in the Middle East and its impact on energy prices – there are recent signs of improving expectations and activity, but it still feels hesitant.”
Kevin Shaw, managing director of national sales at LRG, said: “The Bank of England’s decision to hold interest rates at 3.75% is better news than we expected even a week ago. After a year in which the economic mood music has gone from anticipating the many interest rate cuts to the largest number of rises, this stability is very welcome.”
However, the impact of the decision was somewhat weak on the buy-to-let market.
Steve Cox, chief commercial officer at Fleet Mortgages, said: “For the buy-to-let market, the encouraging news is that mortgage rates tend to be decoupled from short-term expectations around the bank base rate anyway.
“In recent weeks, calming financial markets and growing confidence that tensions in the Middle East may not escalate further have helped improve financing conditions, allowing lenders across the market, including fleet, to lower interest rates. While swap rates will continue to respond to economic data and global events, advisors and angel clients can draw confidence from the fact that product pricing has been moving in the right direction despite the ongoing uncertainty over monetary policy.”
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