Interest rate held again at 5.25%

The Bank of England has decided to hold the base interest rate at 5.25% for the second consecutive review. The last review was 21st September.

The decision to keep the rate static was widely expected with inflation, at 6.7%, apparently under control, albeit not dropping.

Last month, the Bank held the rate after 14 consecutive increases, since the end of 2021.

Mortgage rates have started to fall slowly to reflect the Bank’s decisions, but are still much higher than a year ago.

The Bank’s Monetary Policy Committee voted by a majority of 6–3 to maintain the rate at 5.25%. Three members preferred to increase it by 0.25 percentage points, to 5.5%.

Nicholas Mendes, mortgage technical manager at John Charcol, says: “Today’s ‘hold’ announcement has been widely anticipated by the markets and commentators, with any further rate hikes looking increasingly unlikely.

“UK economic activity is weakening, and inflation is on a downward trend. Now is the time to pause and monitor rather than adding further pressure onto borrowers and consumers.”

Mark Harris, CEO at mortgage broker SPF Private Clients, says: “As expected, the Bank of England has made the wise and welcome move to hold base rate again at 5.25 per cent.

“The run of 14 consecutive rate rises before September’s pause have been painful. Today’s decision will raise hopes that base rate has peaked, allowing the dust to settle rather than causing further anxiety and distress for borrowers,” he says.

‘Borrowers will be wondering what happens next. Those hoping rates will move swiftly downwards could well be disappointed; we expect a period of around six months during which rates will plateau, followed by a gradual reduction in base rate to ‘normalised’ levels of around 3 per cent.”

Nick Leeming, chairman of Jackson-Stops, says: “The market will take some clarity and comfort from the Bank of England’s decision to hold the base rate at 5.25% today.

“While international events have added to already challenging conditions and the curtain has firmly fallen on the era of cheap borrowing, monetary policy will not be determined in the long-term by short-term pressures, and quite rightly so,” he says.

“This is the final time the Monetary Policy Committee will meet before the Chancellor’s Autumn Statement, when we hope to hear more about the Government’s plans for the housing market including possible policy changes and tax cuts.”

Simon Gammon, managing partner at Knight Frank Finance, says: “Mortgage rates have been easing since late July and are now beginning to plateau.

“The Bank of England’s decision to hold at 5.25% was largely priced in, and we expect the rate of inflation to be the biggest determinant of whether we see more substantial mortgage rate cuts before the end of the year,” he says.

“Typical five-year fixed rates now sit around 4.8%. That may ease to around 4.5% by the year end if the annual rate of inflation dips to 4% – 5%.”

John Phillips, CEO of Spicerhaart and Just Mortgages, says: “It is encouraging to see the Bank of England continue to hold interests rates, as the markets and the majority of economists expected.

“In reality, it feels like the only logical move as it’s still too soon for any reduction and an increase would just lump further misery and uncertainty on borrowers – especially as the Bank of England itself still doesn’t yet know the full extent or impact of its 14 previous rises,” he says.

“While inflation stagnated in September, the general consensus is it will continue its downward trend. In the mortgage market, today’s news will hopefully offer some stability and give lenders the confidence to take a further look at their books and continue to price more competitively.”

Tomer Aboody, director of property lender MT Finance, says: “The Bank of England has wisely held rates on the back of dipping inflation.

“Uncertainty around interest rates, which are also much higher compared with recent years, does nothing for confidence and is feeding through to lower level of mortgage approvals for both transactions and remortgaging,” he says.

“With base rate appearing to have peaked, the next step is some form of government assistance on stamp duty to incentivise buyers and get the housing market moving.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “Extending the pause in the onslaught of successive rate increases is good news for the property market.

“In present troubled economic times, stability aids confidence, which is so vital to decision-making when it comes to buying and selling property,” he says.

“In our offices, we are finding that many people who want to move are holding off until they see mortgage rates and inflation come down further, with little prospect of further rises.”

Jason Tebb, CEO at OnTheMarket, says: “Holding rates steady at 5.25 per cent will boost buyer and seller confidence, giving a welcome lift to the Autumn housing market, which traditionally tends to be busy.

“The Bank of England’s decision to hold rates for the second consecutive meeting will be welcomed by borrowers hoping this is further confirmation that base rate has peaked after many months of increases, which have negatively impacted affordability,” he says.

“Another pause should give buyers and sellers who had put plans on hold more confidence to transact.”

David Hannah, chairman of Cornerstone Group International, says: “It is disappointing to see the Bank of England’s announcement that interest rates will remain at 5.25% at a time when the UK property market is at risk of freefalling into a crash.

“Developers aren’t building at the moment; prospective first-time buyers are holding off from entering the market and we’re seeing a mass exodus of landlords – largely caused by sky-high interest rates.

“Not to mention the plight faced by those who’ve come to the end of longer-term fixes to find their repayments skyrocketing to unmanageable levels,” he says.

“I hope that we will see the BoE cut interest rates by half a basis point at their next meeting – this would catalyse activity in the housing market and allow for somewhat of a soft landing rather than a potential crash.”

Nathan Emerson, CEO at Propertymark, says: “It’s a steady reassurance to see the Bank of England hold base interest rates at 5.25% this time around.

“Many families continue to struggle regarding the cost-of-living crisis, and it will hopefully come as a potential encouragement to families there is no new elevated squeeze on their monthly budgets,” he says.

“Propertymark are still extremely keen to see both inflation and interest rates firmly come back under control once again.”

Chris Hodgkinson, MD at the House Buyer Bureau, says: “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, as the higher cost of borrowing and wider cost of living continue to restrict home buyers.

“So today’s decision to hold interest rates should be viewed as a welcome positive for the property market and should allow buyers and sellers alike to act with a greater degree of confidence going into 2024.”

Jonathan Samuels, CEO of Octane Capital, says: “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 per cent target.

“Given that there’s still a good bit of work to be done, today’s decision to hold interest rates won’t come as a surprise, and we can expect the base rate to remain around five per cent for some time yet.”

Dominic Agace, CEO at Winkworth, says: “It looks like we are now at peak cost of finance and with real wage growth and inflation falling, without significant price declines, we would hope this builds confidence for the property market in 2024.”

Matt Thompson, head of sales at Chestertons, says: “When the Bank of England announced for interest rates to remain at 5.25% in September, we registered an almost immediate impact on the property market with buyers feeling more confident to move forward with their property search.

“Today’s news that rates remain unchanged provides at least some certainty that the cost of borrowing won’t increase further for the time being which will likely result in more house hunters entering the market before the year ends.”

Matt Smith, Rightmove’s mortgage expert, says: “A second consecutive pause is a good indicator that the base rate has reached its peak, which will be reassuring to those looking to take out a mortgage soon.

“Today’s decision was widely expected, as many of the factors that contributed to the hold in September appear to be continuing,” he says.

“We’ve now seen the arrival of a sub-5%, 5-year fixed rate mortgages in the important 85% loan-to-value bracket – the deposit size we see for many first-time buyers and home-movers. After today’s news, we can expect mortgage rates to continue to edge downwards.”