Estate agents hoping for a base rate cut today by the Bank of England are likely to be disappointed following a violent and bloody few weeks in the Middle East.

Many within the property sector had hoped that a base rate cut this month was on the cards, which was widely predicted before President Trump and his allies began bombing Iran and Beirut.

Sales agents in particular had hoped a cut would kick-off the Spring sales market with a bounce – but this now looks very unlikely.

The rising cost of petrol and other inflationary pressures caused by the closure of the Straits of Hormuz – through which some 20% of all crude oil form the Middle East passes  – will see the bank’s Monetary Committee (main image) likely hold its base interest rate at 3.75% rather than reducing it.

Following four interest rate cuts last year, followed by a hold during the February Monetary Committee meeting, futures markets had initially predicted a 0.25 percentage point cut for March.

Such huge economic changes are causing some uncertainty among home buyers and borrowers, with the latest HomeOwners Alliance research showing they are almost evenly split on where mortgage rates are heading in the next 12 months with 23% expecting them to rise and 25% thinking they will fall.

Paula Higgins, CEO of the HomeOwners Alliance, says: “[Such] uncertainty often leads to inertia, with homeowners waiting to see if rates improve”.

Comment

The agent

Paul Hardy, MD at LSL Estate Agency Franchising, says: “If you had asked me before the end of last month, I would have been very happy to be commenting on an interest rate cut.

“But with global events unfolding as they are, rising costs and a real sense of uncertainty in the wider economy, I feel reassured that the Bank of England has chosen to hold the base rate at 3.75% on March 19th.

“While we have not yet seen any immediate impact from these events on the market, it is still early days. Stability, for now, is welcome. Holding rates provides a degree of certainty for homeowners, buyers and lenders at a time when confidence is crucial.

“Like many across the industry, we are hopeful for a swift resolution to the current global challenges, which would allow for a more positive economic outlook in the months ahead.”

The mortgage broker

“Markets have clearly shifted. A slower and more cautious path for rate cuts is now being priced in than looked likely only a few weeks ago,” says Nicholas Mendes, Mortgage Technical Manager at John Charcol.

“The Bank is now more likely to stay on hold until it has greater confidence that this latest energy-led inflation shock is not feeding into wider inflation pressures. That makes a smooth run of cuts look less likely, and any further easing may now come later and more gradually than many had expected.

“If this proves to be a temporary spike and underlying inflation continues to soften, cuts later in the year are still possible. The domestic backdrop is not especially strong, and the Bank will not want to leave policy too restrictive for too long if growth and the labour market continue to weaken.

“If energy prices stay elevated for longer, or inflation expectations start to drift again, rates may stay higher for longer than markets were expecting at the start of the month.

“For borrowers, the message is simple. The market may still improve over time, but the path down now looks slower, bumpier and more dependent on events outside the UK.”