Bank reveals latest interest rate decision

The Bank of England and its Governor Andrew Bailey have decided to freeze the base interest rate again this month, keeping it at 5.25%.

Andrew Bailey Governor of the Bank of England

The Bank of England has again decided to freeze the base interest rate at a 16-year high of 5.25%.

In a split vote, the Bank’s Monetary Policy Committee decided by 7-2 to retain the same rate until its next meeting on 20 June.

In March, the committee also froze the rate with an almost unanimous vote even though inflation fell to its lowest level in more than two years at 3.4%, and later 3.2%.

Under control

Andrew Bailey, the Bank’s Governor (main picture), said the interest rate can be reduced once inflation is clearly under control.

This all set against a background of rising mortgage costs as the Bank has stuck to its policy of waiting for inflation to fall.

Late last month, a clutch of lenders including Barclays, HSBC, and NatWest, confirmed they would be increasing their lending rates, piling further pressure on home buyers and remortgagers.

5-year fixed rate

And the latest tracker data from Rightmove shows mortgage rates going up, with the average 5-year fixed mortgage rate now above 5% for the first time since January.

The average 5-year fixed mortgage rate is now 5.02%, up from 4.56% a year ago, and the 2-year fixed rate is now 5.41%, up from 4.84%.

Tom Bill, Knight Frank
Tom Bill, Knight Frank

Tom Bill, head of UK residential research at Knight Frank, says: “UK housing market activity has improved this spring, but there is still a sense of hesitancy among buyers and sellers as they wait for the first rate cut in four years.

“Once that moves onto the short-term horizon, mortgage rates should edge lower and demand will improve,” he says.

“In the meantime, there is downwards pressure on house prices as mortgage costs creep higher, supply rises and a wave of homeowners roll off sub-2% mortgages. We expect UK prices to rise by 3% this year as services inflation gradually comes under control and borrowing becomes slightly cheaper in the second half of the year.”

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Nick Leeming, Jackson Stops

Nick Leeming, Chairman of Jackson-Stops, says: “The Bank of England has taken a ‘no news is good news’ approach to today’s decision, opting to hold firm for another six weeks. While no change was widely assumed, the expectation is that June’s meeting will finally break the base rate deadlock and initiate a rate cut.

“The Bank of England’s hawkish approach may not be headline grabbing, but at least it isn’t a distraction for buyers or sellers who want to press on with their sales and searches. While everyone in need of a mortgage would prefer rates to fall significantly, interest rates of around 5% are not high by historic standards.”

Ben Thompson CEO, Mortgage Advice Bureau image
Ben Thompson, Deputy CEO, Mortgage Advice Bureau

Ben Thompson, Deputy CEO at Mortgage Advice Bureau, says: “With the Bank of England sitting on its hands again, borrowers will have to wait that bit longer for the first base rate cut since 2020.

“Inflation falling slower than expected has put the brakes on, with policymakers waiting for signs that the cost of living crisis has been shaken off – and there may be some way to go yet,” he says.

“Swap rates have been choppy on BofE expectations, and it’s why some lenders have repriced in recent weeks. That said, March saw an 18-month high in mortgage approvals, with new buyers pressing ahead with their plan,” he says.

Nathan Emerson, CEO, Propertymark

Nathan Emerson, CEO of Propertymark, says: “As interest rates continue to remain the same in order to combat levels of inflation this country has not witnessed for decades, Propertymark is optimistic that buyers will continue to adapt to these new market conditions.

“Our own Housing Insight Report discovered that there has been a 4% increase in the number of potential buyers registered, and an 8% increase in the number of available properties to rent, which shows that there are some reasons to remain optimistic that the housing market is recovering from shock economic factors from the last three years.”

Jeremy Leaf
Jeremy Leaf

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “The Bank had some tough choices to make – on the one hand it can see inflationary pressures easing with the headline figure now at its lowest for two years but on the other, wage growth remains stubbornly high.

“As far as the housing market is concerned, we are finding borrowers increasingly concerned at the uptick in mortgage rates and the delay in what most people expect is a cut in base rate sooner or later,” he says.

“The comments and voting pattern around the decision are sometimes more interesting than the decision itself, and clearly the direction of travel for rates is downwards when it is judged the right time to do so. The chances of even a small reduction resulting in runaway property prices or substantial rise in activity are slim, bearing in mind recent fairly flat activity.”

Kevin Shaw, National Sales Managing Director, Leaders Romans Group

Kevin Shaw, National Sales Managing Director at Leaders Romans Group, says: “Maintaining the current base rate is a missed opportunity to stimulate economic activity. With inflation rising more slowly, the persistently high rates may unnecessarily constrain the economy— akin to wearing a “hair shirt” longer than necessary.

“This could adversely affect market sentiment, which is much more positive than a year ago. Furthermore high mortgage rates will exacerbate affordability issues for those getting onto the property ladder or renewing fixed-rate mortgages. A reduction in rates would have supported economic growth, and hesitancy to lower them might hinder the recovery in the housing market.”

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Mark Harris, CEO, SPF Private Clients

Mark Harris, CEO of mortgage broker SPF Private Clients, says: “The Bank was always likely to hold rates this month, and we expect June’s meeting to have a similar outcome.

“That said, by that point there should have been two further lots of improving inflation data, reinforcing the argument for cutting rates by the end of the summer,” he says.

“It is time for the rate setters to be bold and start reducing rates, which will increase borrower confidence and give the housing market a welcome boost.

“As far as mortgage pricing is concerned, what the Bank of England does with base rate is only part of the picture. If Swap rates, which underpin the pricing of fixed-rate mortgages, edge further downwards, then lenders will introduce cheaper mortgage rates, increasing the choice for borrowers at more palatable pricing.

“With Barclays and Lloyds already announcing reductions this week, hopefully it is only a matter of time before other lenders follow suit.”

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Amy Reynolds, Head of Sales, Antony Roberts

Amy Reynolds, Head of Sales at Richmond estate agency Antony Roberts, says: “It is not surprising that the Bank of England held rates again at 5.25%.

“If the inflation target is hit, we could see a rate reduction next month, which will stimulate borrowing if lenders also reflect this in lower mortgage rates at circa 4%,” she says.

“In an election year, the government will be very keen to be on track with its inflation forecast, as any positivity helps consumer confidence and the property market. The market relies on confidence; stable interest rates mean a stable, albeit relatively dull, market.

“A rate reduction as soon as possible will be pivotal in stimulating activity in the property market.”

Tomer Aboody
Tomer Aboody, Director, MT Finance

Tomer Aboody, Director of property lender MT Finance, says: “This decision is likely to be the final rate hold, with the eagerly-awaited first reduction in base rate coming at June’s MPC meeting.

“With inflation increasingly coming under control and a general election looming, although when this will happen is anyone’s guess, one or two rate reductions over the coming months would be welcome. This will significantly boost buyer and seller confidence, which is so vital for encouraging activity in the housing market.”

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Jason Tebb, President, OnTheMarket

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

“As the spring housing market kicks into gear, a rate cut would be extremely timely, boosting confidence, activity and transactions, which are all so important not just for the housing market but the wider economy,” he says.

“The increase in activity and interest seen by agents so far 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 the further encouragement they need.”

Matt Smith - Rightmove
Matt Smith, Mortgage Expert, Rightmove

Matt Smith, Mortgage Expert at Rightmove, says: “After a few weeks of mortgage rate increases, we’ve seen early signs that this current run of rate increases has peaked and we’d expect that average mortgage rates will begin to trickle down again soon.

“Inflation still seems to be heading in the right direction, a position that the Bank has highlighted in its decision today, with a view that it will fall below the 2% target in the coming month,” he says.

“The market is still assuming that the first base rate cut will happen in the summer, and today’s decision is unlikely to change that view. All eyes now turn to the publication of April’s inflation data, which is the next key milestone, and is likely to determine the immediate direction of mortgage rates in the UK.”

Anthony Codling, MD Equity Research, RBC Capital Markets

Anthony Codling, MD Equity Research at RBC Capital Markets, says: “This month two MPC members voted for a rate cut (up from one the month before), whilst seven voted to hold at 5.25%, and for the second time in a row no member voted for an increase.

“Bank rate may be on hold, but the scales are slowly starting to tip in favour of a cut. We are not there yet, but we are on the way and this should bring comfort to those looking to remortgage in the second half of 2024 and UK housebuilders will also benefit from lower mortgage rates which aid housing affordability.”

Robin Rathore - Bamboo - image
Robin Rathore, CEO, Bamboo Auctions

Robin Rathore, CEO at Bamboo Auctions, says: “While holding the base rate provides stability to the wider economic environment, the sector remains fragile; fall through rates are high and news of mortgage rate increases are not giving any comfort to buyers or sellers.

“We’re seeing more activity in the market than we were 12 months ago, and this is partly down to rising payments as mortgage terms come to an end pushing many to sell,” he says.

“Sensible pricing remains the key determinant for vendors who are looking to sell quickly. We’ve also seen a 30% increase in the number of sellers listing for sale by online auction through our agent partners, as sellers desperately seek more speed and certainty in their transaction.”

Nicholas Mendes​​​​, Mortgage Technical Manager, John Charcol

Nicholas Mendes​​​​, Mortgage Technical Manager at John Charcol, says: “Until a reduction in the bank rate occurs, there will be a period of uncertainty that prompts markets to speculate and continually adjust their forecasts.

“This situation is expected to lead to an ongoing phase of repricing by lenders. Lenders are continually adjusting their profitability margins in response to changes in funding lines and shifts in market competition.

“This adjustment process is a direct reaction to the uncertain financial environment, as lenders strive to maintain their competitive edge while managing their financial risks,” he says.

“Swaps have reduced slightly in recent days as markets price in a rate reduction, which should pave the way for lenders to re-price marginal decreases over the next fortnight.”

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