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The Bank of England kept interest rates on hold for the seventh consecutive session.
UK interest rates have remained unchanged since the Bank of England raised them to 5.25% last August.
The decision to freeze interest rates again comes as inflation, which measures price increases over time, falls again to the 2% target, as revealed yesterday.
As well as its interest rate decision, the Bank of England has just published its latest forecasts predicting what’s coming for inflation and the UK economy.
Bank of England Governor Andrew Bailey doesn’t think it’s yet time to cut interest rates.
Markets are only now fully pricing in a September rate cut, but many economists had expected the bank to move on this month.
Keep it on hold one last time in June? There’s still a chance the central bank’s monetary policy committee will cut rates when it meets in August. In a sign the bank is close to cutting rates, the central bank’s policy minutes said the decision was “delicately balanced”.
Industry response:
Jeremy Leaf, an estate agent in north London, said: “A cut in the base rate would provide some stimulus to the housing market following the uncertainty inevitably created by the announcement of the election result, but no changes are expected.”
“Inflation has thankfully fallen but it is still early days as wage growth and pressures remain particularly on the services sector.”
“Hopefully, lenders will realise that a reduction in base rates is coming sooner or later and start reducing mortgage rates in anticipation of this, even if only slightly, which will certainly boost confidence.”
Nathan Emerson, CEO of Propertymark, commented: “Further confidence on the long-term trajectory of inflation is essential for the housing market and the Bank of England has kept a very open mind on this before making any commitments to start cutting base rates. Propertymark remains hopeful that interest rates will be reduced when circumstances allow, which will lead to competitive mortgage deals from lenders at the first opportunity. In terms of the housing market, much-needed progress has been made since the start of the year and it is vital that stability is maintained.”
Tony Gambrill, regional sales director for Chestertons, said: “Property buyers have been waiting for interest rates to fall for months and will be discouraged by the Bank of England’s failure to announce any rate cuts despite inflation falling to its target of 2%. Nevertheless, some buyers will go ahead and buy now, regardless of interest rates, as they expect lower interest rates will lead to increased buyer activity and inevitably higher property prices. To avoid overpaying for property in the future, these buyers will act now, expecting the difference between current and future asking prices to exceed the savings they will make from lower interest rates.”
Tony Gambrill, regional sales director at Chestertons, said: “Property buyers have been waiting for interest rates to fall for months and will be discouraged by the Bank of England’s failure to announce any rate cuts despite inflation falling to its target of 2%. Nevertheless, some buyers will go ahead and buy now, regardless of interest rates, as they expect lower interest rates will lead to increased buyer activity and inevitably higher property prices. To avoid overpaying for property in the future, these buyers will act now, expecting the difference between current and future asking prices to exceed the savings they will make from lower interest rates.”
Iain McKenzie, CEO of The Guild of Property Professionals, commented: “The Bank of England’s decision to keep interest rates on hold means that inflationary pressures are easing, but it’s clear that other factors are still in play which influenced this choice. While buyers and sellers will have to wait a little longer for interest rate cuts, the property market continues to recover steadily, with buyer demand, transaction levels and prices growing. A rate cut would lower mortgage rates, providing much-needed relief and further boosting market confidence.
“While it didn’t happen today, there is widespread expectation that the base rate will be cut soon, with economists at Capital Economics predicting it will be cut to 4.5% by the end of 2024. This optimistic economic outlook has helped push consumer confidence to its highest level since December 2021 in May.”
“Although borrowing costs remain high compared to the ultra-low interest rates of the past few years, recent economic stabilization has left homeowners feeling more comfortable about their ability to make mortgage payments and they stand to benefit from expected rate cuts.”
“While all attention is focused on the upcoming election and its impact on the real estate market, experts expect the impact to be minimal and not disrupt normal seasonal trading patterns. It is highly likely that an initial drop in interest rates will have a greater impact on market activity than the upcoming election.”
Lomond CEO Ed Phillips commented: “Stability has been key to returning the UK property market to health in recent months and this stability has been brought about by the interest rate freeze since September last year.”
“Home buyers across the country would have been expecting a rate cut today, but the decision to keep the base rate unchanged at 5.25% will at least keep the economy stable.”
“This should further fuel the levels of buyer activity that have been building over recent months and ensure that the year ahead is a much more favorable one for the market compared to the uncertainty of last year.”
Tom Bill, head of UK residential research at Knight Frank, said: “The UK housing market is still awaiting the first interest rate cut in more than four years, which will keep mortgage rates and sentiment in check over the summer. With services inflation persisting, a rate cut is unlikely to come until early autumn, but if mortgage rates fall as expected and stability returns to Westminster, we expect activity levels to rise in the final four months of the year, which should support an increase of 3% in average UK prices through 2024.”
Mark von Grundherr, Director at Benham & Reeves, commented: “The lack of news regarding today’s decision is good news, and the certainty provided by keeping the base rate on hold again is certainly better than the string of successive rate hikes we have seen in recent years.”
“Mortgage approvals have remained above 60,000 per month for the third consecutive month, indicating that buyer confidence is growing due to the stability provided by the unchanged base rate.
“The election is unlikely to slow the momentum of this growing market and the UK property market remains in very strong shape, especially with the prospect of interest rate cuts in the near future.”
Verona Frankisch, CEO of Yopa, added: “With base rates remaining unchanged for the seventh consecutive year, stability is likely to be seen this summer. The housing market is already responding with increased activity from both buyers and sellers.”
“While the election may be a focal point in the coming weeks, the current market enthusiasm is unlikely to cool and, with interest rate cuts yet to be seen, the outlook for the year ahead looks very positive.”
“Stability has been key to returning the UK property market to health in recent months and this stability has been brought about by the interest rate freeze since September last year.”
“Home buyers across the country would have been expecting a rate cut today, but the decision to keep the base rate unchanged at 5.25% will at least keep the economy stable.”
“This should further fuel the levels of buyer activity that have been building over recent months and ensure that the year ahead is a much more favorable one for the market compared to the uncertainty of last year.”
Bank of England calls for interest rate cut as UK inflation nears 2% target