12:19 PM, 14th December 2023, About 11 months ago
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The Bank of England has held firm as interest rates remain unchanged at 5.25%.
The decision, which was widely expected by financial markets, means borrowing costs will remain at their highest level for 15 years.
The Bank had previously raised rates 14 times in a row to tame inflation but has left the last two interest rate decisions the same.
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 move follows the Federal reserve system freezing the US rate yesterday. Many people will be breathing a sigh of relief at the BOE decision before the Christmas period.
Matt Smith, Rightmove’s mortgage expert said: “Today’s decision to hold the Base Rate as expected is some further good news to those planning a New Year move and looking to take out a mortgage soon.
“We typically see more people consider their moving plans after Christmas, and after 20 consecutive weeks of steady average mortgage rate falls, this is the most settled mortgage market we’ve seen for a while, giving confidence to those thinking of moving. However, rates do remain at elevated levels.
“The market opinion remains that Base Rate has reached its peak. The fact that swap rates – the underlying cost of mortgages to lenders – fell further after the latest UK GDP data was published yesterday, was another indicator that the markets were confident about how today’s announcement would play out.
“Many of the factors that contributed to the hold in September and November are continuing, and a flattened Base Rate, which could begin to fall in 2024, is looking increasingly likely.
“Today’s hold could provide some room for lenders to offer further mortgage rate drops – though it’s likely that lenders may hold back offering these to borrowers this side of Christmas, to take advantage of the seasonal jump in demand that usually happens in January”
Foxtons CEO, Guy Gittins, says: “We’re now seeing clear evidence that the property market has weathered the storm of economic uncertainty this year and is now taking positive steps in the right direction.
“Since the Bank of England first decided to hold rates at 5.25%, mortgage approval numbers have increased, sellers have continued to return to the market and UK house prices have climbed consistently on a month to month basis.
“While hopes of a rate reduction were probably a tad optimistic this side of the Christmas period, a third consecutive decision to keep the base rate held will only add to this growing property market optimism.”
CEO of Octane Capital, Jonathan Samuels, commented: “Although the Bank of England’s strategy appears to be working, it’s important to note that the fall in headline inflation has been largely driven by a reduction in food and energy prices.
“Core inflation has proved more stubborn and so the decision to keep the base rate as it is a sensible one and we expect one made in readiness for a rate reduction in the new year.
“The result of holding rates whilst inflation is falling gives the effect of a rate rise in real terms and this will continue to benefit the economy.”
