The Bank of England (BoE) has held interest rates at 5.25% for the seventh time despite yesterday’s falling inflation figures.
Most economists had predicted that the Bank would maintain rates suggesting that it would wait to see if inflation remains at 2% before possibly making a first rate cut in the autumn.
INDUSTRY REACTION
Nathan Emerson, PropertymarkNathan Emerson, CEO of Propertymark, says: “For the housing market it is vital there is further confidence regarding the long-term trajectory of inflation, and this is a stance the Bank of England has remained very open about before any commitment is made to start reducing the base rate.
“Propertymark remain keen to see rates reduced when circumstances allow and for this to then translate into competitive mortgage deals from lenders at the first opportunity.
“We have seen a much-needed progress since the start of the year regarding the housing market and it is vital that stability is maintained.”
Jason Tebb, President of OnTheMarket, says: “With the seventh hold in base rate in as many meetings and inflation hitting the Bank of England’s 2 per cent target, borrowers grow increasingly impatient for a rate reduction.
Jason Tebb, OnTheMarket“A rate cut would be extremely welcome, boosting housing market confidence, activity and transactions, which in turn would benefit the wider economy.
“However, the impending election was always going to make a cut unlikely this time around. There are also underlying inflationary factors, such as high services inflation, which mean the majority of the Monetary Policy Committee appear unconvinced that now is the time to cut rates.
“The increase in activity and interest seen by agents this year suggests the worst of the nervousness about the market is behind us.
“With buyers and sellers keen to get on with their moves after a period of sitting on their hands waiting for mortgage rates to improve, a rate reduction, when it comes, will provide the further encouragement they need.”
Kevin Shaw, LRGKevin Shaw, National Sales Managing Director at LRG, says: “The Bank of England’s decision to hold interest rates at 5.25% is no surprise given the proximity to the general election: had the Bank lowered rates for the first time in 11 months just two weeks before the polls, the decision may have been interpreted as politicking.
“But a drop of at least 0.25% on 1 August seems an inevitability given yesterday’s further drop in inflation and the inclination of some Committee members to reduce the rate previously.
“It was in August last year that interest rates reached their recent high (the highest since February 2008) and the property industry, including the millions of consumers impacted, would welcome a long-awaited reduction.
“The housing market has seen cumulative growth throughout 2024 but affordability remains an issue for some, specifically first time buyers. An interest rate drop would consolidate the renewed confidence in the market and enable people to make the move that they may have been postponing for the last year.
“So while I wouldn’t dare to predict the news headlines on 5 July, I am reasonably confident in predicting a drop in interest rates on 1 August.”
Tom Bill, Knight FrankTom Bill, head of UK residential research at Knight Frank, says: “The UK housing market is still waiting for the first cut in more than four years, which will keep mortgage rates and sentiment in check over the summer.
“Stubborn services inflation means any cut may not happen until early autumn but if mortgage rates fall in anticipation and stability returns to Westminster, we can expect higher levels of activity in the final four months of the year, which should push average UK prices 3% higher over the course of 2024.”
Nick Leeming, Chairman of Jackson-Stops, says: “The Bank of England’s decision to maintain the base rate, even as inflation has fallen back to the 2% target for the first time in nearly three years, is a testament to the cautious yet pragmatic approach being taken.
Nick Leeming, Jackson-Stops“The Bank’s prudent hold fortifies market stability, bolstering the positive trajectory witnessed in the first half of the year – with rising viewings, listings, and buyer interest recorded across our network of offices. This continuity primes the market to capitalize on potential rate cuts in the coming months.
“While everyone in need of a mortgage would prefer rates to fall, it’s key to remember the bank is playing the long game here.
“This decision should instil confidence among both buyers and sellers, as it suggests a commitment to maintaining a stable environment for housing transactions.
“Buyers can proceed with their searches and secure mortgages without the uncertainty of fluctuating rates, while sellers can feel reassured that the market conditions remain favourable for attracting potential purchasers.
“A pivot towards lower rates later this year, even if only minor, would help to ease affordability constraints at the lower end of the housing market and help to ensure chains don’t break down once sales have been agreed. We eagerly await the next decision!”
Ed Phillips, LomandEd Phillips, Lomond Chief Executive, says: “Stability has been key to the returning health of the UK property market in recent months and this stability has come by way of a freeze on interest rates since last September.
“While the nation’s homebuyers will have been hoping for a reduction today, the decision to keep the base rate at 5.25% will, at least, continue to steady the ship.
“This should help to further boost the growing levels of buyer activity that have been building in recent months and ensure that the year ahead is a far more positive one for the market compared to the uncertainty of last year.”
