Stability in the Property Market as Bank of England Holds Interest Rates Steady

The Bank of England’s Monetary Policy Committee (MPC) has chosen to keep the base rate unchanged at 5.25% for the second month in a row, voting 6 to 3 in favour of the decision. This comes after the UK inflation rate remained at 6.7% for the year leading up to September, as reported by the Office for National Statistics (ONS), a figure significantly above the 2% target set by the Bank of England.

Similarly, the Federal Reserve in the United States recently opted to maintain its target range for the federal fund rate between 5.25% and 5.50%. Despite the unchanged inflation rate of 3.7% for the year to September, Jerome Powell, Chair of the Federal Reserve, stated that there is “a long way to go” to bring inflation down sustainably.

In addition, the European Central Bank’s (ECB) Governing Council chose to keep its three key interest rates at 4.00%, 4.50%, and 4.75% last week. It marked the first instance since the summer of 2022 that these rates have not experienced an increase. ECB President, Christine Lagarde, remarked that even though “inflation is still expected to stay too high for too long”, it did see a ‘marked’ decrease to 4.3% in September from 5.2% the prior month.

Rachel Springall, a Finance Expert at Moneyfactscompare.co.uk, commented on the potential implications for borrowers, saying, “Borrowers may well be cautious or even reluctant to apply for a new fixed rate mortgage until fixed rates fall further, so seeking advice to explore all the options available to them is essential.” She added optimistically that further falls in swap rates are expected, and that this could lead to reductions in fixed rates.

For savers, Springall advised considering options offered by challenger banks or building societies, which often provide some of the best returns available. She emphasized that “considering the more unfamiliar brands is always wise to compare rates if they have the same depositor protection in place as a big high street bank.”

Chris Hodgkinson, Managing Director of House Buyer Bureau, observed, “We’re seeing clear signs that the property market is now starting to stabilise, although transaction levels and sold prices remain down on the historic highs seen in recent years.” Hodgkinson sees the decision to hold interest rates as a positive sign for the property market moving into 2024.

Jonathan Samuels, CEO of Octane Capital, also commented on the Bank of England’s efforts to control inflation, stating, “The Bank of England seems to have tamed inflation to a degree, albeit it’s taken considerably longer than it should and remains some way off the two percent target.” He anticipates that the base rate will stay around five percent for some time.

Bradley Post, CEO of RIFT, highlighted the relief households will feel with the steadiness in interest rates, especially during the festive season, while Jason Ferrando, CEO of easyMoney, noted that although the freeze on rates is expected, it brings little immediate relief to borrowers.

On the other hand, Duncan Kreeger, CEO and founder of TAB, sees the decision to maintain the interest rate as bringing stability to the market, benefiting investors, developers, and lenders alike.

The Bank of England’s approach was also commended by Jonathan Rolande, spokesman for the National Association of Property Buyers, who called it a “good decision” and a “reprieve for homeowners, tenants and borrowers.”

The next base rate announcement is scheduled for Thursday 14 December 2023.