Bank of England’s decision to hold the Base Rate – Industry Reaction

The Bank of England held interest rates at 5.25% for the seventh time in a row. The decision comes despite official figures yesterday which revealed inflation had fallen to the Bank’s target of 2% for the first time in nearly three years. Here are some thoughts from the property industry.

 

Rightmove’s mortgage expert Matt Smith said:

“While the Base Rate hasn’t dropped today, yesterday’s positive inflation figure has kept us on course for a first cut by August. While many will have hoped for a surprise cut today, a hold was expected by the market – and therefore, this certainty could still lead to mortgage rates trickling down rather than up over the next few weeks, which is really what home-movers are after.”

 

Kevin Shaw, National Sales Managing Director at LRG said:

“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.”

 

Daniel Austin, CEO and co-founder at ASK Partners, said:

A hold on interest rate rises was expected given the current election campaigns. However, it shows we have reached a level of stability in the economy with inflation remaining dampened. Although it doesn’t affect the affordability of debt, I think the stability will encourage mortgage lenders to continue to offer lower rate products and it provides a firm base for the next government to work from after the election. We are already seeing slight uptick in the market as values have reached the bottom. It has brought investment capital back into the real estate sector from buyers who have been waiting to make opportunistic, distressed purchases and the increased activity is bringing back buyer confidence. As a lender to property developers and investors, we have seen first hand the impact that rate hikes have had on borrowers and the market; continued stabilisation will be welcome news and rate cuts will undoubtedly come later in the year.”

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