The Bank of England yesterday announced interest rates would remain at 4.25%, a decision that’s received mixed responses from property experts.
Interest rates are set to stay at 4.25% – a verdict that has come as a bit of a blow after the Bank of England slashed rates in August and then again last month.
The Monetary Policy Committee (MPC) said they have decided to keep them unchanged as a result of ‘heightened uncertainty in the economy’ following the UK Budget and US presidential election. The news that inflation increased to 2.6% in November also undoubtably influenced the decision.
The Bank of England remarked the increase was higher than expected and reflected stronger price rises in core goods and food, while inflation across the services sector also remained elevated.
With this in mind, Governor Andrew Bailey said: ‘We think a gradual approach to future interest rate cuts remains right, but with the heightened uncertainty in the economy we can’t commit to when or by how much we will cut rates in the coming year.’
However, not everyone in the MPC shared the same view that interest rates should stay the same. Six members decided to keep rates at 4.25% while three voted for a 0.25% reduction.
On the topic of split opinions, a number of property experts have shared their opinions on the news. They can be found below.
Stephanie Daley, Director of Partnerships at mortgage advisor Alexander Hall
‘The Bank of England’s decision to hold interest rates at 4.75% comes as no surprise, given the current economic climate. With UK inflation rising to 2.6% in November – the second consecutive monthly increase – and core inflation climbing to 3.5%, there’s clear upward pressure on prices.
‘For borrowers and homeowners, stability in the base rate this month goes hand in hand with the expectation of a very slow downward movement in the base rate.
‘Forecasts still expect future base rate drops next year but in the short term the sustained inflation trend will likely keep lenders vigilant and mortgage pricing reflective of longer-term uncertainties.
‘It is essential for both home movers and remortgage clients to seek advice in order to navigate these challenges and find solutions that best suit their financial situations in what still remains a very changeable market.’
Jonathan Samuels, CEO of specialist lender Octane Capital
‘Whilst it’s been a largely positive year for the property market, we simply haven’t seen the base rate reductions that many had hoped for and, as a result, higher mortgage rates have remained a challenge for many borrowers.
‘We’ve seen inflation rear its head again in recent months and so a hold was always going to be on the cards today. However, the silver lining is that we remain in a far more positive place than we did even a year ago and buyers should continue to act with a greater degree of confidence when traversing the market, as they have done for much of this year.’
Marc von Grundherr, Director of Bentham and Reeves
‘Not the Christmas cracker that many homebuyers were hoping for but not quite a lump of coal either and today’s hold on the base rate will do little to impact the current trajectory of the property market, particularly given the stamp duty deadline in place.’
Robert Sadler, Vice President of Real Estate at Excellion Capital
‘When the base rate was cut back in November, there was wide expectation that it would be the first of at least two cuts before the end of the year, but at Excellion we sensed that the market response to Labour’s inflationary Autumn Budget would in fact mean that any further base rate cuts in 2024 were highly unlikely.
‘With recent rises to inflation and the 5-year SONIA swap rate up more than 30 basis points in the past week alone, investors are desperately holding out for some kind of relief. Sadly, it hasn’t come today. As a result, on the residential side, we’re likely to see mortgage rates increase, and on the commercial side we’re looking at heightened investor caution driven by increased borrowing costs.
‘For the government itself, this is also bad news as it means their ambitious housebuilding targets are now even further out of reach than they were before because this hold will likely mean projects cost more and move more slowly. At a time when the UK needs an environment of ambition and calculated risk taking, this base rate decision is likely to foster one of caution and constraint.’
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