BoE leaves interest rate unchanged – property sector reacts

UK interest rates have been left unchanged at 5.25% by the Bank of England in a move economists had expected.

The Bank had previously raised rates 14 times in a row to tame inflation, leading to increases in mortgage payments but also higher savings rates.

Its Monetary Policy Committee, which decides the rates, voted by a margin of 6-3 to keep them at 5.25%.

Three members preferred to increase Bank Rate by 0.25 percentage points, to 5.5%.

‘The Base Rate has reached its peak’

Rightmove’s mortgage expert, Matt Smith, said: “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.

“Plus, the drop in energy prices as a result of the recent Price Cap change means we’ll hopefully see a drop in inflation when next month’s figures are released.”

He added: “We’ve now seen the arrival of a sub-5%, 5-year fixed rate mortgage 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.”

‘Businesses and consumers could not tolerate much more’

Rob Clifford, the chief executive of mortgage and protection network, Stonebridge, said: “The mood music prior to this announcement appeared to point to the MPC holding Bank Base Rate due to a number of factors, not least a fall in UK food inflation announced earlier this week and, I suspect, a growing sentiment that businesses and consumers could not tolerate much more in terms of further rate hikes.

“So, it’s not surprising to see today’s decision, however we must be mindful that holding BBR does not mean a cut in bank base rate will follow anytime soon.

“A common view is that this could stay at today’s level until the early part of 2025, even if – as anticipated – inflation does fall further.”

‘Bank of England has made the wise and welcome move’

Mark Harris, the chief executive of mortgage broker SPF Private Clients, said: “As expected, the Bank of England has made the wise and welcome move to hold base rate again at 5.25%.

“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 added: “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%.”

‘The effects of 14 previous rises’

Fred Jones, the COO of instant buying firm UPSTIX, said: “Homeowners may be tempted to breathe a sigh of relief as rate hikes remain paused, but the effects of 14 previous rises have not yet fully fed through to the housing market.

“Falling prices and low demand are two issues that will continue to be a thorn in sellers’ sides as the Monetary Policy Committee cements its ‘higher for longer’ policy.”

Dominic Grace, a senior advisor at data science company Outra, said: “The ‘higher for longer’ approach of the Bank will scupper any notion that, for the foreseeable future, interest rates will return to the freakishly low levels enjoyed by home buyers over recent years. This is not just affecting values, but sales volumes too.

“Accordingly, agents will now need to work not just harder, but much smarter, to ascertain where they should operate and how they win instructions in a fiercely competitive market.”

‘Decision to hold base rate is wise’

Anna Clare Harper, the cchief executive of sustainable investment adviser GreenResi, said: “The decision to hold base rate is wise in the context of housing because rate increases since 2022 have still not fed through to prices.

“Mortgage costs have increased by two to three times for up to 2 million households on variable rates or with fixed rates ending in December. They have also rendered buying a house unaffordable for many.

“Demand is down significantly, so those who need to sell are negotiating on prices.”

She added: “However, the full impact of higher mortgage costs for households affected has not been felt yet, because house price expectations take time to adjust. Instead, the market is slowing, with transactions down year-on-year.”

‘Wisely held rates on the back of dipping inflation’

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

“This should give consumers confidence that inflation is on track to be halved next year, but more importantly it will keep more money in people’s back pockets as they continue to struggle with the high cost of living.

“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.”

Jeremy Leaf, a north London estate agent and a former RICS residential chairman, said: “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.

“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.”

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