REACTION: What does interest rate ‘hold’ mean for market?

The Bank of England held the base interest rate at 5.25% in its latest decision, with an almost unanimous vote.

Members of the Bank’s Monetary Policy Committee led by Governor Andrew Bailey (main picture) voted 8-1 in favour of keeping the current rate despite this week’s falling inflation figure.

Inflation fell to its lowest level in more than two years at 3.4%, increasing the pressure on the Bank to cut the base rate

And Propertymark called on the Bank of England to cut interest rates after the latest inflation figures.

Not yet

Bailey says it is “not yet” the time to cut interest rates, despite “further encouraging signs” that inflation is coming down.

The Bank has to be sure that inflation will reach the Government’s 2% target and “stay there”, he says.

“We’re not yet at the point where we can cut interest rates, but things are moving in the right direction,” Bailey adds.

INDUSTRY REACTION

Steve Richmond, General Manager UK&I at Reapit, says: “It was somewhat expected that the Bank of England would choose to hold interest rates at 5.25% for the fifth time in a row.

“Though this may bring some disappointment, especially to buyers looking for more affordable mortgage rates, there will at least be relief among buyers and sellers that the rate didn’t see an increase.

“Despite the fall in inflation last month there is still considerable fragility in the market and it’s understandable that the BOE would want to avoid pushing up inflation again.”

Dominic Agace, CEO at Winkworth estate agents, says: “It is encouraging that inflation data points to a more optimistic outlook in earlier cuts, and so with a bright start behind us and a late election now being mooted, hopes for 2024 are rising for the property market.”

Sam Reynolds, CEO of Zero Deposit, says: “It’s not just homebuyers who were hoping to see rates come down today, landlords were also in need of some property market positivity to help revitalise their appetite for buy-to-let investment.

“Not only have many been suffering at the hands of expensive variable rate products, but all too often they will have been doing so while only repaying the interest on their loan”

Ed Phillips, CEO at Lomond, says: “Having previously endured 14 consecutive base rate hikes since December 2021, it’s been a case of no news is good news for the nation’s homebuyers of late when it comes to the Bank of England’s decision on interest rates.

“That said, they can be forgiven for feeling a little disappointed that we didn’t see a cut materialise today, particularly given this week’s inflation figures,” he says.

“While a hold on interest rates has helped stabilise the market, the cost of borrowing remains a significant obstacle for many and while we’ve seen a strong start to the year, a reduction in interest rates would help to open the floodgates and drive market momentum forward.”

Jason Harris-Cohen, CEO of Open Property Group, says: “It’s been a month of double disappointment for homebuyers so far, with a lacklustre Spring Budget providing no initiative to transact, and now their hopes of a interest rate cut have also been dashed.

“Inflation has been heading in the right direction and the property market is showing strong signs of recovery, however, a rate cut would have delivered the shot in the arm it needs to really move forward at pace.”

Marc von Grundherr, Director of Benham and Reeves, says: “Continued certainty is no bad thing but homebuyers are crying out for some form of relief, particularly in London where the combination of high house prices and high mortgage rates are dampening purchasing power to the greatest extent.

Today was the last chance to offer some form of stimulus to help supercharge the spring surge in market activity and while we still expect an uplift in market activity, many buyers will remain on the fence until such time an interest rate reduction materialises.”

Colby Short, Co-founder and CEO of GetAgent, says: “Having reached the peak with respect to interest rates, the only way is down from here, and homebuyers across the nation will have been hoping that today was the day we started our descent.

“Unfortunately, we look set to remain where we are for that little bit longer and although today’s decision won’t kick start the market, it certainly won’t slow the momentum that has been building in recent months.”

Jonathan Samuels, CEO of Octane Capital, says: “Many have been critical of the Bank of England’s tentative approach to initially increasing interest rates, myself included, and had they acted with more gusto to begin with, it may have tamed the stubborn trajectory of inflation sooner.

“Nevertheless, we’re now starting to see inflation ease and while swap rate movement remains unpredictable at present, there’s hope for homebuyers yet that a reduction in interest rates is on the horizon, which should settle the market and bring mortgage rates down over time.”

Guy Gittins, Foxtons CEO, says: “Homebuyers have been waiting patiently for an interest rate reduction, and while it is largely expected to come this year, it seems as though they will have to wait a little longer still.

“The positive to take is that an air of stability has returned to the UK property market since rates were held at 5.25% last September, and this has helped revitalise buyer activity levels in recent months.”

David Hannah, Group Chairman of Cornerstone Tax, says: “February’s inflation figures and mortgage approvals should indicate an overall cooling off of the UK economy which must be acknowledged by the BoE and, in an effort to avoid a sudden crash of inflation, will increase pressure on the MPC to start reducing interest rates sooner rather than later.

“I’d urge the MPC to seriously consider cutting the interest rate as even a reduction by a quarter percentage point would signal optimism within the UK economy, with a target base rate of 3-3.5% being the overall goal if the BoE want to truly prioritise buyers in the new year.”

Nathan Emerson, CEO of Propertymark, says: “The Bank of England issued an optimistic projection last month that inflation could fall back down to pre Covid-19 levels by this summer.

“There are signs that interest rates are not deterring people from buying their first home.

“Propertymark’s own Housing Insight Report found that there has been a 120 per cent increase in the number of potential buyers registered so now that optimism and momentum is gaining in the market, we now need to see interest rates start to fall so that buyers’ affordability can further increase, opening up the market and providing more options for those looking to move home.”

John Phillips, CEO of Spicerhaart and Just Mortgages, says: “It’s a real shame that the MPC didn’t seize the opportunity to make the first long-awaited cut to base rate.

“That’s especially true given yesterday’s news and the positive trajectory of inflation. While the central bank does have to exercise caution to reach its 2% target, it’s critical it doesn’t stifle the economy by making a decision too late,” he says.

“Nonetheless, a fifth consecutive hold brings stability and along with yesterday’s inflation news, may reflect positively on swap rates – giving lenders the opportunity to reprice rates, even if only marginally.”

Tomer Aboody, Director of MT Finance, says: “This decision is likely to be one of the final rate holds for now, especially as we are seeing other countries such as Switzerland cutting their rates.

“With inflation coming under control and a general election looming, some rate reductions in the next few months would be welcome, boosting confidence and activity in the housing market.”

Jeremy Leaf, north London estate agent and a former RICS Residential Chairman, says: “The Bank’s decision to hold rates is not surprising but the pressure is building for a cut sooner rather than later.

“The inflation figure always helps set the trajectory for rates and its present level, with the prospect of further drops, will probably force the Bank’s hand at some point,” he says.

“Further falls in the pace of wage growth in particular will contribute to the decision making but we have already noticed mortgage payments at least are beginning to fall again as they are not bound by the same constraints and are certainly helping to build confidence in the housing market to take on debt.”

Nick Leeming, Chairman of Jackson-Stops, says: “Today’s decision to hold rates was widely expected, but could suggest we are finally reaching the light at the end of the tunnel.

“Optimistic predictions are hinting that the Bank of England may be on course to begin bringing the base rate down as early as May.

“The reason for this greater positivity is that the battle against inflation is being won quicker than expected, but putting the UK on a more stable economic footing remains a marathon not a sprint”

Simon Gammon, Managing Partner at Knight Frank Finance, says: “The combination of yesterday’s inflation figures and today’s interest rate decision will add some much needed stability to the mortgage market.

“Inflation appears to be under control and the Monetary Policy Committee is growing increasingly dovish.

“One major lender dropped its rates yesterday and we’d expect to see more of that during the coming fortnigh,” he says.

“Any cuts will be fairly marginal, but it looks increasingly like borrowers won’t have to wait long before mortgage rates begin falling more meaningfully. A spring or summer cut to the base rate will tee up a very busy second half of the year.”

Matt Smith, Rightmove’s Mortgage Expert, says: “Although today isn’t the day for the first Base rate cut, each day that passes is one step closer, and it’s very much a ‘when’ rather than ‘if’ we see the first drop from 5.25%.

“Mortgage rates have risen slightly over the last six weeks, but it does feel like the pressure on lenders to increase rates has dissipated, with some lenders having already cut rates in response to yesterday’s positive inflation new,” he says.

“This may mean that average mortgage rates start to fall back in the next couple of weeks. If this is the case it will be first time average rates will have reduced in over a month.”

Jason Tebb, President of OnTheMarket, says: “With the fifth hold in base rate in as many meetings and inflation appearing to be increasingly under control, buyers and sellers will be wondering when the Monetary Policy Committee is going to start reducing rates.

“As we move into Spring and what is traditionally a busier time of year for the housing market, a rate cut would be timely, boosting confidence, activity and transactions, which are so important for the housing market and wider economy,” he says.

“The flurry of activity and interest seen by agents this year suggests the worst of the nervousness about the market is behind us. With buyers and sellers keen to get on with their moves after a period of sitting on their hands waiting for mortgage rates to improve, a rate reduction would provide further encouragement.”