REACTION: Bank of England maintains interest rate at 5.25%

The Bank of England has decided to keep the base interest rate at 5.25% in a close vote of the Monetary Policy Committee.

The base interest rate remains at 5.25% after the Bank of England’s Monetary Policy Committee voted 5-4 against an increase.

Many commentators had expected another rise in the rate, but the surprise fall in inflation probably prompted a rethink.

Inflation fell slightly last month to 6.7% from 6.8% in July, prompting some analysts to predict that the Bank would steer away from a rate rise.


But there were divided opinions on whether the Bank would still go for a rise to ensure inflation was under control.

Last month the MPC decided by a split vote to raise rates in the face of rising inflation.

The base rate had been rising since the end of 2021, with last month being the 14th consecutive increase.

The impact on homeowners with mortgages has been severe, as rates have risen dramatically albeit with a levelling off recently.

Mortgage rates will now be watched closely to see if they fall in the next few months.

Industry Reaction

Nicholas Mendes, mortgage technical manager at John Charcol, says: “Yesterday’s unexpected inflation 6.7% announcement in August eased some of the pressure on the Bank of England decision making on whether to continue increasing interest rates.

“Moments after yesterday’s inflation announcements market expectations of a rate rise began to plummet, from what was an 80% certainty of a further rate hike down to an equal split,” he says.

“There has been a steady decline in swap rates in recent days, which has resulted in many lenders reducing rates on both residential and BTL products, which is welcomed news for mortgage holders.”


Nathan Emerson, CEO at Propertymark, says: “It’s positive to see that the bank rate has remained unchanged this time around and will be reassuring for those looking to enter the housing market especially.

“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.”

david hannah stamp dutyDavid Hannah, group chairman of Cornerstone Tax, says: “I am relieved to see that the Bank of England has decided to pause interest rates and keep them at 5.25%.

“It wouldn’t have made sense for them to increase them by 0.25%, given the fact that we have seen a positive decline in inflation. The past interest rate increases have had a detrimental effect on Britain’s property market, most notably a significant reduction in property transactions, due to the fact that the cost of mortgages has skyrocketed as a result.

“The BoE’s decision will also come as welcome news for the 1.5 million households coming to the end of their fixed rate mortgages this year.”

Mark Harris image

Mark Harris, chief executive of mortgage broker SPF Private Clients, says: “Following better-than-expected inflation figures, the Bank of England has made the wise move to halt the consecutive rate hikes and give them time to do their job.

“Consecutive rate rises have been painful; it’s time to leave alone for now, rather than causing continued anxiety and distress for borrowers.

“Many lenders have substantially reduced their fixed rates in the past few days and weeks on the back of calmer swaps, which underpin the pricing of fixed-rate mortgages.

“While the days of rock-bottom mortgage rates are long gone, we expect pricing to improve further over coming weeks and numerous sub-5 per cent five-year fixes to come to the market.”

Richard Donnell, executive director of research at Zoopla, says: “Better than expected inflation figures have put an end to successive base rate increases.

“This will be welcome news to homebuyers who have already felt the impact on mortgage rates which have risen higher over the summer and remain well over 5%.

This has led to demand for homes falling by 25% since the Spring as buyers wait to see whether mortgage rates start to fall,” he says.

“There has been some softening in mortgage rates but as long as rates stay over 5% then house prices will continue to fall.

“The concern is that money markets expect base rates to stay higher for longer in the face of higher inflation which will keep 2 and 5-year fixed-rate mortgage rates higher.”

Hina Bhudia, partner at Knight Frank Finance, says: “Yesterday’s positive inflation figures and the Bank of England’s decision to hold the base rate at 5.25% will both pave the way for lenders to make more cuts to mortgage rates in the weeks ahead.

“The pace at which borrowers are opting for tracker mortgages over fixed rate products will now pick up. Both trackers and two-year mortgages are priced in similar ranges.

“If the base rate has now peaked and rate cuts begin around the middle of next year as analysts expect, then borrowers stand to save money by opting for a tracker mortgage.

“Mortgage rate cuts have improved sentiment significantly, but they will eventually reach a natural plateau, with the best fixed rate deals starting with a four.”

Jason Tebb - OTM - imageJason Tebb, CEO at OnTheMarket, says: “The Bank of England’s decision not to raise interest rates will be welcomed by borrowers hoping that base rate has now peaked after many months of increases.

“Consecutive rate rises have exacerbated increasingly stretched affordability and done nothing for the confidence of buyers relying on mortgages. It is hoped that this pause will give buyers and sellers who had put plans on hold more confidence to transact.”

Jeremy Leaf, north London estate agent and former RICS residential chairman, says: “The unexpected fall in inflation made this interest rate decision harder than it might have been. Last week it was an odds-on certainty that rates would rise by at least a quarter point but the climate has since changed.

“What it does show is that it is dangerous to make a snap decision based on one month’s figures and then regret it later.

Stability is so important to the property market and brings confidence to buyers and sellers sitting on the fence finding it difficult to budget before deciding to make their moves. This hold, after many months of rises, will bring some welcome reassurance.”

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John Phillips, CEO of Spicerhaart and Just Mortgages, says: “Like many, my expectation was that the Bank of England would follow the European Central Bank and go for one more increase.

“However, I’m delighted to be proven wrong and see the MPC hold rates instead. This will certainly be a positive for mortgage holders, borrowers and the general public who have been demoralised by fourteen straight interest rate rises.

“While yesterday’s good news on inflation certainly made the pause more palatable for the MPC, there’s no question high household costs – particularly fuel, food and energy, still present a challenge. As a result, affordability will remain a clear obstacle for both borrowers and brokers.”

Matt Thompson, Chestertons

Matt Thompson, head of sales at Chestertons, says: “This though does not mean that the Bank has finished its current cycle of interest rate hikes, with the consensus expectation being for one more increase as the Bank continues to address high inflation.

“Once this has been reached, the Bank is expected to maintain interest rates at that level as it waits for the impact of higher interest rates to feed through to the weakened economy.

“The good news for borrowers is that the cost of borrowing is expected to stabilise with the Bank rate; although we don’t anticipate mortgage rates will return to the low levels seen in recent years.”

Ben Thompson CEO, Mortgage Advice Bureau imageBen Thompson, deputy CEO at Mortgage Advice Bureau, says: “After 14 long months of hikes, today’s hold in the headline rate will offer much needed relief to homeowners.

“Whilst there isn’t obviously a reduction today, this announcement should offer a glimmer of hope that we’re nearing or have reached the peak, as well as providing a moment of respite for mortgage holders in the long-running interest rate cycle.

“Fixed rates however continue to fall, which is good news and the pause in rate increases will also be helpful for those on variable and tracker rates. Much will ride on the next set of inflation figures, and falling inflation will determine how long this pause holds before rates start to be reduced.”

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Matt Smith, Rightmove’s mortgage expert, says: “The surprising decision to hold rates rather than raise them as expected is another indication that we may now be at the peak of base rate rises.

“It will be particularly welcomed by those on a tracker mortgage who won’t see a rise in their monthly payments for the first time since December 2021.

“Today’s decision to pause rates is positive news for prospective home movers, and it is likely that lenders will continue to reduce rates, as we’ve seen over the last eight weeks, and we may see the pace of reductions increase in the coming weeks.”



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