Bank of England holds interest rates at 5.25% for fourth consecutive time

Interest rates have been held by the Bank of England at 5.25% since August 2023, with predictions mounting that they will finally begin to fall later this year.

Related topics:  Finance,  Rates,  Bank of England
Property | Reporter
1st February 2024
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"We now know the base rate has almost certainly peaked, and it is just a matter of time before it comes back down. This shift has already started to have an impact on lenders and the property market in recent months"
- Paresh Raja - MFS

The Bank of England's Monetary Policy Committee has voted 6-3 to maintain Bank Rate at 5.25%, in a move that surprised no one due to ongoing fears of inflation 'reigniting'.

Here's what the UK property industry made of it:

Matt Smith, Rightmove's mortgage expert said: "As painful as rate rises have been for many people, there are increasing signs that Base Rate rises are having a real impact on the economy, and inflation is heading in the right direction. Another hold in the Base Rate today also shows that the Bank will also be cautious not to overshoot Base Rate rises, and will be keen to maintain the current stability.

“The market appears more robust than last year, evidenced by the fact that the surprise uptick in inflation a couple of weeks ago didn’t derail the downward trend of mortgage rates. The big picture remains the same - the Base Rate is unlikely to rise further, and mortgage rates have some room to come down further before settling.

“It’s been a promising start to the year for housing market activity, with more people than this time last year listing their home for sale, looking to buy, or getting a Mortgage in Principle to see what they can afford.

"For anyone thinking of moving but still holding back from taking action, the slight uptick in average rates in some lower Loan-To-Value brackets this week is a reminder that average rates won’t fall forever and mortgage rates appear to be settling after significant drops at the start of January."

Tom Bill, head of UK residential research at Knight Frank, said: “The decision to hold was never in doubt but the fact inflation is due to fall notably faster than previously guided by the Bank of England is good news for the housing market.

"For anyone buying or remortgaging, the Bank of England’s cautious tone should be weighed against the fact lenders set their fixed rates based on market expectations, irrespective of whether they come true or not. As the economic outlook improves, we expect UK house prices to rise by 3% this year.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “Although improving, the property market remains sensitive and fragile. As a result, as important as today’s rate decision itself is the rhetoric around it.

"Talk is of rates falling during 2024 but by how much, how fast and when? Inflationary pressures are abating, while wholesale energy prices have fallen significantly. The Middle East remains a risk, while the labour market continues to ease and wage growth is projected to decline further in coming months.

“The question borrowers are weighing up is whether the recent reduction in mortgage rates is just the beginning, or should they wait longer before taking the plunge?”

Paresh Raja, CEO of Market Financial Solutions, said: “The Bank of England continues to walk a tightrope. Sticky inflation is making them hesitant to cut rates, but a rise in company insolvencies and the general impact of a higher cost of borrowing on the UK economy is piling on pressure to drop the base rate.

“Either way, we now know the base rate has almost certainly peaked, and it is just a matter of time before it comes back down. This shift has already started to have an impact on lenders and the property market in recent months.

"Mortgage, bridging and BTL rates all have started to fall, and there are the green shoots of recovery emerging after two challenging years, with early signs suggesting buyer demand and house prices are picking up. The Bank might hold again – perhaps multiple times – before the cuts come, but the market is benefitting as that seemingly inevitable decision draws closer.”

Nathan Emerson, Propertymark CEO, comments: “It is positive to see that many people intending to buy their first home or sell their current one won’t be hindered by an increase in interest rates.

“However, it is now time for the UK Government to continue to curb inflation so that interest rates can fall further to help ease the backlash this has had on people’s affordability. They should make 2024 the year consumers start to enjoy some confidence again following three years of disruption to the economy.”

CEO of Octane Capital, Jonathan Samuels, commented: “It appears that the Bank of England’s slow but steady approach to managing the economy has finally started to pay off, with inflation falling sharply this week.

"Generally speaking, today’s decision to keep the base rate held should bring further positivity for the economy and the property market, in particular. But while it’s likely to stoke the fires with respect to the increasing number of buyers returning to the market in recent weeks, they are best advised to proceed with caution.

"Swap rates have been gradually climbing so far this year in anticipation of today’s decision and so an ongoing degree of certainty where the base rate is concerned doesn’t necessarily mean lower mortgage rates are guaranteed.”

Foxtons CEO, Guy Gittins, commented: “A freeze on interest rates since September of last year resulted in 2023 finishing with a far higher degree of mortgage market positivity than many had forecast and it’s now clear that this positivity has carried over into 2024. We’ve already seen a promising start to the year compared to January last year, as buyers have returned to the market.

"However, the potential now is that mortgage rates could start to climb following a fourth consecutive decision to keep the base rate frozen at 5.25% and we’ve already seen evidence of lenders increasing swap rates in recent weeks in anticipation of today’s news.

"This will further add to the air of urgency shown by buyers of late, who have been encouraged by sub 4% mortgage opportunities and have been keen to secure them while they are available.”

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