Bank of England Holds Interest Rates: What Does It Mean for the Mortgage and Property Market?

In a significant move, the Bank of England has decided to maintain interest rates at 5.25%, marking the first time in 15 months that rates have remained steady.

The decision sparks a discussion among economists who suggest this could be the peak of mortgage rate increases. Following a series of consecutive hikes, there’s a growing sentiment that we might be on the cusp of witnessing a decrease in rates.

Indeed, certain lenders have already initiated minor reductions. A consistent rate from the Bank of England, or potential future cuts, could further prompt lenders to reduce their rates.

Many believe that this static rate bodes well for the property market. The decision may bolster confidence among potential buyers and sellers, cultivating optimism that interest rates may have reached their zenith and might start declining in the foreseeable future.

Giles Coghlan, Chief Market Analyst consulting for HYCM, weighed in on the decision: “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.” He further noted potential risks: “There is a risk that the ‘lag effect’ on interest rate hikes means that today’s decision may not be felt for another 9 to 12 months… today’s hike runs the risk of overtightening the economy and inducing a period of stagflation further down the line.”

Nathan Emerson, CEO of Propertymark, provided a positive perspective: “It’s positive to see that the bank rate has remained unchanged this time around… This now indicates that rises to interest rates have been impactful and that the fall in house prices has helped to even the affordability playing field and keep the wheels of the housing market turning.”

However, Jason Ferrando, CEO of easyMoney, offered a more cautious outlook: “Yet another base rate increase may have been viewed as overkill… so many will argue that a freeze perhaps wasn’t the right path to take today. We’re yet to see prices actually fall and it’s simply the speed of increase that has reduced.”

Lastly, Chris Hodgkinson, Managing Director of House Buyer Bureau, highlighted the impact on sellers and buyers: “Despite today’s freeze many of those considering a property purchase are likely to remain sat on the fence… The one positive to take is that house prices are yet to show any significant signs of instability and so those who can secure a buyer should still be able to sell for a good price.”