Bank Of England Rate Held at 5.25%

The Bank of England's Monetary Policy Committee has voted 5-4 to maintain Bank Rate at 5.25%.

The industry had widely predicted a 15th consecutive rise to 5.5%, however the latest ONS figures published yesterday show that CPI inflation saw a surprise fall to 6.7% in August.

Twelve-month CPI inflation fell from 7.9% in June to 6.7% in August, 0.4 percentage points below expectations at the time of the Committee’s previous meeting.

The MPC noted that CPI inflation is expected to fall "significantly further in the near term", reflecting lower annual energy inflation and further declines in food and core goods price inflation.

The mortgage industry welcomed the decision to hold Bank Rate, saying that those due for renewal in the coming months or on tracker mortgages will 'breathe a sigh of relief'.

Paul McGerrigan CEO at Loan.co.uk, said: “After 14 rate hikes, the MPC has finally paused, reflecting no doubt, on the recent 0.7% dip in core inflation and the cry's for a breather to assess the impact of their actions.

“Global tensions, like the Ukraine conflict and reduced oil production, remain economic threats. Current SVR and tracker rate holders are relieved, and we hope for decreasing interest rates by year-end, potentially boosting the property market and staving off recession.”

Thomas Davies, MD at mortgage broker Alexander Hall, commented: “Borrowers will be pleased that the Bank of England has decided not to increase rates, and this will only serve to reinforce the positive news that mortgage prices are falling as cooling inflation and the reduction in swap rates bring some needed respite. With markets anticipating that the Bank of England has neared the top of its rate increases, and available mortgage deals exceeding 5,000 for the first time since May, borrowers should take comfort in the fact that mortgage products are becoming more palatable.”

Paresh Raja, CEO of Market Financial Solutions, said: “It was a close call, and a welcome surprise for most. By and large, lenders had expected - and priced in - another 0.25% hike today, so this decision will inject a little more spark into the market. Indeed, even with the expected hike, rates had stabilised in recent weeks, with the lending industry increasingly confident that we’ve reached the top of the interest rate hill that has been climbed since December 2021.

“Still, there will be a natural period of adjustment in the months ahead. Looking at the bigger picture, a base rate of 5.25% is not abnormal, but borrowers had grown accustomed to a period of record-low rates. As we are now less likely to see any notable swings in the base rate, house prices will likely settle as buyers can establish what their real spending power is. Lenders and brokers must be proactive in helping in that regard - providing clarity and assurance to borrowers wherever possible, allowing them to enter the property market with confidence.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, added: "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. Supply is outstripping demand, which will drive down rates and Swaps, while still a little volatile, are trending downwards. While we know this can all change again on the back of negative data, for now the outlook is much more promising than it was three months ago."

Credit The Finanical Reporter

ROZI JONES | EDITOR, BARCADIA MEDIA LIMITED

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