The Bank of England’s Monetary Policy Committee (MPC) has voted to hold the base rate at 5.25% for a third consecutive time.
This move followed the central bank’s initial decision to pause rate hikes in September, after 14 consecutive rises beginning in December 2021.
However, the decision comes as many commentators predict a round of interest rate cuts from the Bank in 2024, amid growing recession concerns.
The most recent decision followed positive figures released by the Office for National Statistics (ONS) last month, which saw inflation fall by 2.1%, to 4.6% from 6.7%.
Reaction
Samuel Mather-Holgate, independent financial advisor at Mather and Murray Financial:
“The Bank of England seem schizophrenic on base rate. The day after the US showed the way, with expectations of three rate cuts next year, our central bank have three policy members voting for more rate hikes. Their own forecasts today state inflation will be much lower than expected next year, but in the same breath they say they are going to keep rates higher for longer. The government needs to consider whether Andrew Bailey is the right person for this job, given the impact of the current base rate on households and businesses.”
Leigh Rowland, director at Mortgages Made Easy:
“It is the season to be jolly and the majority of homeowners with a tracker mortgage can be pretty jolly today following the Bank of England’s decision to leave the base rate at 5.25%. Turkey and all the trimmings will be on the table at Christmas as there are no changes to monthly payments. Those on fixed rates coming to an end in 2024 will also be able to enjoy the warm fuzzy feeling from the mulled wine as a degree of economic stability looks to be upon us. For those on variable rates, who can say what the lenders will do but let’s hope it’s good news or no news so everyone can enjoy the festive period.”
Graham Cox, founder at Self-Employed Mortgage Hub:
“Surprisingly, there were three votes on the MPC for raising rates by 0.25%, with the remaining six electing to hold. Andrew Bailey is maintaining the line that there will be no base rate cuts until late 2024. I believe we’ll see one by the Spring, as the economic outlook gets worse and election fever increases pressure on the Bank of England to act.”
Amit Patel, adviser at Trinity Finance:
“For the 3rd month in a row, the MPC has opted to keep interest rates on hold at 5.25%, which is great news for borrowers and small to medium-sized businesses that are the lifeblood of our economy. This will certainly bring some festive cheer to borrowers up and down the country. The decision comes as no surprise and is in line with market expectations. Will we see a possible rate reduction in 2024 is the million-dollar question?”
Peter Stokes, director at Davidson Deem Ltd:
“Today’s base rate hold will not have surprised the markets. The consensus now is that the base rate has peaked and the focus is increasingly on when the first cut will be. It’s shaping up to be in 2024 but the next set of inflation data will influence the exact timing.”
Gary Bush, financial adviser at MortgageShop.com:
“The announcement by the Bank of England that they are holding the base rate at 5.25% was expected but still gratefully received. It was likely sealed by the weak October GDP print yesterday and ongoing falls in inflation. Lenders have already reacted to the GDP analysis released, by launching even lower fixed-rate mortgage offers over the past 24 hours. We hope that this rate decision will further fuel the fixed rate mortgage war that is raging, which will benefit mortgage applicants and existing borrowers throughout 2024. An encouraging end to 2023 overall.”
Riz Malik, founder & director at R3 Mortgages:
“In recent days, the markets are forecasting 4 to 5 interest rate reductions in 2024 even though the Bank of England remains more hawkish than the Federal Reserve. However, lenders are likely to withhold their significant price reductions until the beginning of the New Year. That’s a wrap for 2023.”
Alastair Hoyne, chief executive officer, Finanze Group at Finanze:
“This is what I expected and the right decision. There needs to be a bedding-in period and I suspect we’ll need to see the inflation target hit before any rate cuts come. I doubt we’ll ever go as low as before and think 4% will be a more realistic long-term rate.”
Justin Moy, managing director at EHF Mortgages:
“To see the base rate held at 5.25% for the 3rd month running is definitely what the markets had been expecting. For those with tracker mortgages there will be no changes, but for those looking to renew their mortgage products over the coming months we should see more fixed rate cuts over the next few months given how the money market will react to this hold position. However, we always need to watch inflation figures and other worldwide factors such as fuel costs, as we have seen before how quickly rates can change for the worse and can wipe out much of the good work of the past 3-4 months. Early preparation for renewals is vital. This is largely a positive decision from the Bank of England today.”
Matthew Jackson, director at Mint FS:
“On balance to hold feels like the right decision – i would have liked to see a reduction or at least a hint towards one given the stagnant economy and slide towards a recession.I think the MPC needs to be more reflective of its decisions and accept that they have contributed to the current situation, did not act fast enough to combat inflation and then went too far, too quickly which is undoubtedly putting the UK economy into reverse.”
Craig Fish, director at Lodestone Mortgages & Protection:
“As expected the rate was held, but wouldn’t it have been nice to see them drop it to 5%. The government and MPC didn’t act quick enough to tackle inflation in the first place, and then when they did act, they did too much too quickly, and now we are heading towards a recession. For once they should try something different, you never know it might work! We all know that inflation is dropping, despite Rishi and Jeremy claiming the benefit for something that was happening anyway. We also know that next year more than 1.4 million homeowners are going to be coming off low mortgage rates and onto higher ones. The base rate is expected to drop next year, so why prolong the pain of businesses and households any longer?”
Darryl Dhoffer, mortgage expert at The Mortgage Expert:
“In a delicate dance between controlling inflation and supporting economic growth amidst global economic headwinds, the Bank of England has decided to maintain interest rates at 5.25%. While the government has passively watched the situation unfold throughout the year, evidence now points towards a slowing UK economy, with GDP growth declining and consumer confidence hitting an all-time low.
“However, some reprieve from economic headwinds could partially mitigate the impact of rising inflation, potentially leading to lower interest rates compared to recent trends. If this were a boxing match between the Bank of England and the government, the bank would likely hold a slight edge due to its perceived superior expertise, while the government’s mixed objectives would hinder its chances of victory. The government must develop a cohesive strategy and unwaveringly adhere to it to have any hope of success, though some may argue that their current inaction itself serves as a strategy.”
Andrew Montlake, managing director at Coreco:
“Whilst it was no surprise, it is still nonetheless disappointing that the Bank of England did not take the opportunity to spread some festive cheer with an early cut.
“Given the economic outlook, it seems that we will be going into the New Year with interest rates at a higher level than they need to be, and there is an increasing sense that a rate cut will need to happen sooner rather than later.”Inflation is still on close watch, but with thousands more mortgage holders set to come off low fixes into a higher rate environment and wage growth starting to ease, the Bank could find itself yet again behind the curve.
“The good news is that in recent weeks in the money markets, SWAP rates have started to fall markedly and mortgage lenders are entering 2024 in competitive mode, keen to hold on to their existing customers and attract more to increase or maintain their market shares.
“The result should be a busier than expected time for the mortgage and property markets.”
Stephen Perkins, managing director at Yellow Brick Mortgages:
“This was the most predictable result, I don’t think anyone expected anything other than a hold this month. It is probably the right decision at the moment and allows them to see how things settle before the next decision in February. I would expect another hold then too, with hopefully the first reductions in March or April.”
Rohit Kohli, operations director at The Mortgage Stop:
“Today’s announcement by the Bank of England to maintain the base rate at 5.25% was in line with market expectations, and reflects a prudent approach during the festive period. This decision underscores the necessity for stability, a vital component for businesses planning to invest and grow in these uncertain times. However, recent economic indicators, including this week’s GDP’s figures indicating a contraction in the economy and a dip in inflation, coupled with the ongoing trend of rate reductions by lenders, are intensifying the dialogue about the potential for a downward adjustment in the base rate by Threadneedle Street earlier than originally expected.”
Charles Breen, founder & director at Montgomery Financial:
“This was absolutely the correct decision, following the news recently that the economy contracted slightly in October and, in line with the US Federal Reserve, it is the correct decision. This is the Bank of England not letting blood rush to their head, and hopefully it’s the groundwork being laid for serious mortgage rate reductions next year.”
Emma Jones, managing director at Whenthebanksaysno.co.uk:
“This was the right decision, especially for borrowers right before Christmas. We are eager to see stability in the mortgage and property markets in 2024 and a chance for borrowers to settle into the new norm of higher rates. Lenders are currently offering lower rates than they have for the past few months now, so it’s a good time to review your remortgage if you are within 6 months of your current deal.”
Adam Smith, founder at Alfa Mortgages:
“Maintaining the base rate at its current level was the right decision, as inflation continues to edge down inflation. With lenders strategically reducing mortgage rates and house prices exhibiting a downward trend, this creates an advantageous scenario for prospective buyers as we enter the first quarter of 2024.”
Peter Stamford, director and mortgage expert at The Mortgage Uni:
@themortgageuni 14th December 2023 BoE Base Rate Decision #boebaserate #themortgageuni #mortgageukexplained #interestratesuk ♬ original sound – The Mortgage Uni – Adviser
Richard Thompson, director at Abbeydale Mortgages:
“I believe the Bank of England’s decision to maintain the current interest rate was prudent, especially given the need to observe any further reductions in inflation. This cautious approach aligns with the economic climate and ensures stability in the mortgage market. An interesting trend I have observed among my clients is their increasing adaptability to higher interest rates. Many are proactively budgeting for potential mortgage payment increases when their current interest rates expire.
“This financial preparedness is a positive sign of borrowers becoming more resilient in navigating fluctuations in interest rates. Looking ahead, I anticipate a surge in customers curbing non-essential spending, particularly among those whose ultra-low interest rates are set to expire next year. This shift in consumer behaviour is likely to drive a significant portion of my business towards remortgages and product transfers in the coming year.”
Richard Campo, founder at Rose Capital Partners:
“While it is positive for the mortgage market that the Bank of England held rates today, I do find it quite puzzling that three members of the MPC yet again voted to raise rates in the face of negative GDP, and quite frankly a lack of any positive economic data anywhere. I completely understand that their role is to keep inflation at 2% and with inflation currently running 230% above their target level, they clearly can’t ignore that, but is it really worth choking the economy out in order to achieve that goal? Money markets, have, and are continuing to bet, on reductions faster than the minutes of the meeting would suggest, which sets up a fascinating 2024 and who will ultimately be proved right. For now, stability will be welcomed, but with many clients looking down the barrel of their mortgage payments doubling next year, I hope we do see the Base Rate come down more quickly as markets currently predict.”
Michelle Lawson, director at Lawson Financial:
“This announcement is just as we inspected. I think we will see another hold on 1st February as well. This week’s GDP data may well have influenced this decision and swap rates have also been coming down. It’s a good end to the year and brings some confidence to those looking for a mortgage, and injects much-needed stability into the wider housing market.”
Scott Taylor-Barr, financial adviser at Barnsdale Financial Management:
“A hold decision is probably no bad thing, as mortgage interest rates have been tracking down now for some time and the higher base rate is helping savers and other investors who suffered for a long time under the ultra-low interest rates of the past decade. The decision also gives us what many markets love the most: stability. People like to make decisions with the fewest number of variables and the bigger the decision the more they like consistency”
Jack Tutton, director at SJ Mortgages:
“The Base Rate was widely expected to be maintained at 5.25%, however, three of the nine members of the committee voted to increase it again which is interesting, as they must clearly feel that inflation isn’t falling at the required rate. This comes off the back of the US Fed stating that they expect to be able to reduce rates next year. It’s interesting to see what the Bank of England says about the UK’s position about the timing of rate reductions. This latest update will be welcome news to businesses and mortgage holders, especially as potentially up to 1.6 million people are coming to the end of their mortgage deal in 2024. Mortgage lenders are battling it out to be top of the best buy tables. Hopefully with the news today, this will allow them to be more aggressive and continue to reduce the cost of fixed-rate mortgage products into the new year.”
Elliott Culley, director at Switch Mortgage Finance:
“Good news that the base rate has remained the same. Coupled with the poor gdp figures it would have been surprising if the rate had increased further. Interestingly there were 3 members wanting an increase which I can’t understand personally. If GDP remains flat it will be difficult for the Bank of England to not look at reducing the rate soon. Inflation needs to keep coming down, so rate drops in 2024 are looking increasingly more likely. This is all good news for mortgages.”
Simon Bridgland, broker/director at Release Freedom:
“This should keep the steady end to 2023 on a path to continue into the early part of 2024. Pending any further surprise shocks or conflicts around the world, I don’t expect to see any change to the base rate until well into Spring at the earliest. There still appears to be room for further fixed rate drops in both the traditional mortgage market and the later-life sector, which will I’m sure see a flurry of property transactions happening in the new year as consumers are buoyed by sub-5% fixed rates for traditional mortgages and sub-6% rates for lifetime products.”
Amanda Aumonier, head of mortgage operations at Better.co.uk:
“It’s been a tumultuous year for homeowners, we saw remortgage fixed rates surging post the disastrous mini-Budget last year and then peaking around 6.16% during August due to base rate hikes.
“Fortunately, recent positive inflation data means the Bank of England has maintained the base rate, offering a small silver lining for homeowners.
“The combination of declining swap rates and a challenging housing market has incentivised lenders to slash their rates, bringing the average two-year fixed remortgage rate to approximately 5.24%.
“Precise predictions for 2024 are difficult without a crystal ball because they will depend on inflation trends.
“Should the current downward trend persist, variable-rate mortgage holders might want to explore fixed-rate options, but it’s important to take all future forecasts with a pinch of salt because multiple factors influence mortgage rates.
“The fact remains that homeowners approaching the end of their fixed deals are going to have to dig deep to cover the higher cost of their mortgage repayments, with the average two-year fixed rate twice what it was this time two years ago.
“If you don’t think you’re going to be able to afford your mortgage repayments, don’t bury your head in the sand – speak to your lender as soon as possible – they should work closely with you to help find a solution.”
Paresh Raja, CEO of Market Financial Solutions:
“It’s almost two years to the day since the Bank of England began its rate hiking cycle, but today’s decision to maintain rates for a third consecutive time is as sure an indicator as any that it has now peaked.
“It remains very hard to predict where the base rate will sit in six or 12 months’ time.
“For now, though, the property market can only benefit from it holding flat – buyers can adapt to the higher rate environment, with the stability allowing them to properly assess how much they can or want to borrow.
“The house price indices are showing green shoots of recovery, meaning property investors can head into the festive period with a cautious sense of optimism – even if a rate cut won’t be under their Christmas tree this year, many expect the base rate to fall next year.
“However, as always, lenders and brokers must stay on the ball, offering flexibility and certainty in the here and now to help people invest in the property market with confidence in 2024.”
Jatin Ondhia, CEO of Shojin:
“The Bank of England is walking a tightrope. Understandably, it is unwilling to loosen its grip on inflation by dropping rates any time soon.
“But it also has to be careful not to inflict excessive damage on the UK’s contracting economy.
“It’s an unenvious task, but we should welcome the fact that the base rate is likely to hold at 5.25% in the short-to-medium-term – it means people can finally make financial plans with a degree of certainty, and the timing couldn’t be better.
“The New Year always brings about a renewed focus on finances as people set their investing, saving and spending goals.
“Higher interest rates are likely to lead more people towards the wide array of ISA products available, but diversification will be another key trend to watch in 2024, with real estate a perennially popular asset within portfolios.
“Diversifying one’s savings and investments can help hedge against economic volatility, and as the Bank of England continues along the tightrope, preparing for potential volatility next year will no doubt remain on many people’s agenda over the coming months.”
John Phillips, CEO of Spicerhaart and Just Mortgages:
“Instead of a cut and an early Christmas present or a rise and becoming the Grinch that stole Christmas, the Bank of England went with the widely expected option of holding rates for the third time in a row.
“Even with a number of positive indicators, particularly cooling inflation, the bank is still maintaining its position of ‘higher for longer’ – although many are predicting a rate cut early next year.
“Nevertheless, another hold brings continuity and stability and provides an opportunity for lenders to reassess and reprice.
“It will no doubt add further ammo to the ongoing rate war among lenders – which is great news for borrowers and prospective buyers.
“We mustn’t forget though that this will still be higher that what many clients perceive as ‘normal’, highlighting the real need for brokers to be proactive in educating clients on the realities of today’s market and what it means for them and individual situation.
“This will continue to be a big focus for the year ahead, as affordability will likely remain a key challenge for many borrowers.
“There’s no question the successful brokers next year will be those that are getting the fundamentals right, having those deeper conversations and delivering a five-star service and experience – generating referrals and new business in the process.
“This is particularly pertinent with recent reports suggesting gross mortgage lending could drop in 2024.”
Steve Seal, CEO, Bluestone Mortgages:
“Today’s decision to leave rates untouched will be welcomed by would-be and existing borrowers, who have felt the brunt of 14 rate rises in less than two years.
“While this decision could indicate that rate rises have reached their peak, affordability remains a key concern as the cost-of-living crisis continues to squeeze the nation’s finances.
“For those worried about how they can climb onto or up the property ladder amid this challenging environment, rest assured that there is help at hand.
“Whether that be opting for a product transfer, asking for a payment holiday or being signposted to specialist support, the earlier they engage, the sooner they will receive the tailored support to help make their homeownership dream a reality.”
Tobias Gruber, CEO of My Community Finance:
“In the financial landscape of 2023, savers have emerged as clear winners, thanks to the Bank of England’s strategic base rate hikes, compelling providers to offer more lucrative returns.
“Some credit unions, challenger banks, and building societies have commendably responded by diligently passing on these rate changes to their customers.
“Regrettably, the same cannot be said for certain high street banks, which continue to offer paltry returns on their easy-access savings accounts.
“This oversight may prove to be a strategic misstep, especially in the current climate of a burgeoning cost-of-living crisis.
“Today’s consumers are deeply attuned to the nuances of money management and are unlikely to tolerate subpar returns when there are better options just a few taps of a mobile phone screen away.
“I anticipate that big banks may regret not passing on interest rate increases as credit unions and challenger banks position themselves to attract dissatisfied customers. Particularly noteworthy is the shift among younger consumers, who exhibit little loyalty in their banking choices and prioritise the pursuit of the best rates available.
“Savings providers compete with each other, and when savers switch to get better rates, it spurs more competition and results in better rates for everyone. So, take control, ask more from your savings providers, and don’t miss out on this opportunity before the best deals vanish.
“Compare your options among traditional banks, building societies, online banks, and credit unions. It’s just like searching for the best deal on car insurance – the same principle applies to your savings.”
Guy Gittins, Foxtons CEO:
“We’re now seeing clear evidence that the property market has weathered the storm of economic uncertainty this year and is now taking positive steps in the right direction.
“Since the Bank of England first decided to hold rates at 5.25%, mortgage approval numbers have increased, sellers have continued to return to the market and UK house prices have climbed consistently on a month to month basis.
“While hopes of a rate reduction were probably a tad optimistic this side of the Christmas period, a third consecutive decision to keep the base rate held will only add to this growing property market optimism.”
Jonathan Samuels, CEO of Octane Capital:
“Although the Bank of England’s strategy appears to be working, it’s important to note that the fall in headline inflation has been largely driven by a reduction in food and energy prices.
“Core inflation has proved more stubborn and so the decision to keep the base rate as it is a sensible one and we expect one made in readiness for a rate reduction in the new year.
“The result of holding rates whilst inflation is falling gives the effect of a rate rise in real terms and this will continue to benefit the economy.”
Bradley Post, CEO of RIFT:
“While households across the nation may have been hoping for an interest rate reduction in their stocking this December, the decision to hold rates will still be a welcome one as we approach the Christmas break.
“Many households will be reliant on borrowing to help cover the heightened spend of the Christmas period and so a static base rate will, at least, ensure that they can plan accordingly with greater confidence.”
Jason Ferrando, CEO of easyMoney:
“A third consecutive decision to keep interest rates held suggests that while the economic picture is improving, there’s still some ground to be made and inflation remains someway above the target of two percent.
“While today’s decision won’t ease the financial burden of the nation’s borrowers, it will at least provide further stability as 2024 approaches and this should help strengthen the property market, in particular.”
Chris Hodgkinson, managing director of Apex Bridging:
“A hold on interest rates has helped to stabilise the UK property market and we’ve already seen an uplift in buyer activity as a result, as well as positive monthly house price growth.
“Today’s decision will only help to steady the ship further, providing buyers and sellers with a greater degree of certainty as we approach the new year.
“With the expectation of a rate reduction on the horizon, the outlook for 2024 is much more positive than it was earlier in the year.”
Nathan Emerson, CEO of Propertymark:
“There is little denying this year has been difficult for many, with a harsh mix of high inflation and elevated interest rates to contend with. There is no shying away from the fact many households have struggled to get by each month.
“With rates remaining unchanged yet again, Propertymark is optimistic the peak of the turmoil has now hopefully passed, but it will take a little time to see full momentum and confidence back within the housing market once again.
“It’s also important to highlight almost 1.4 million households across the UK have fixed-rate mortgage deals that will come to an end over the coming twelve months, so the road to a fully robust housing market will be closely linked and we may see a few more bumps in the road before a full recovery.”
Karen Noye, mortgage expert at Quilter:
“The Bank of England’s decision to maintain the interest rate at 5.25% is a significant move with multifaceted implications for the UK economy but by and large it should spell good news for mortgages and the housing market.
“For the housing market, this pause in interest rate hikes may boost confidence. More certainty over mortgage costs breeds higher buyer confidence and property market activity.
“More potential buyers should start to feel confident about entering the market, potentially sustaining or even boosting housing prices. Recent house price indices have shown that as a result of limited housing stock prices have modestly increased.
“However, the broader economic context remains challenging. The ongoing cost-of-living squeeze, with rising energy costs and still relatively high mortgage rates continue to strain household budgets.
“This suggests that while the interest rate hold may bring some stability, many households will still face significant financial pressures as we enter into the new year.
“For those with mortgages, the picture is mixed. Borrowers on variable-rate mortgages gain a reprieve from immediate payment increases, which could encourage spending and economic activity.
“However, those looking to remortgage or secure new mortgages may still face relatively high rates and stringent lending criteria. Lenders however are likely to remain competitive, which could lead to more favourable rates for borrowers over time.
“While the BoE’s decision brings some stability and potential confidence boosts to the property market, it exists within a broader context of economic challenges.
“Households and borrowers must navigate a landscape of high living costs and complex mortgage market conditions.
“The direction of future monetary policy and its impact on various economic sectors will be critical in shaping the UK’s economic trajectory in the coming months.”
Andrew Gething, managing director of MorganAsh:
“News of another hold on interest rates marks a stable end to an intense year for borrowing.
“Despite the Bank of England’s own view that this may be the outcome for a much longer period, markets seem buoyed by the long-term outlook for interest rates and the wider economy being far more stable.
“Economists are even suggesting that markets are pricing in cuts next year with forecast rates edging towards to 4% by the end of 2024.
“We’re certainly seeing this positivity in mortgages rates, which continue to improve and become more competitive, which is positive for borrowers.
“Of course, this doesn’t mean it’s all plain sailing from here, with many homeowners and consumers set to feel considerable pressure in the coming year.
“That is especially true for the more than a million homeowners set to remortgage in 2024 onto an improving, but much higher rate than they are used to.
“With the FCA’s own data suggesting that half of all UK adults are vulnerable, there’s every chance that firms could see a growing proportion of vulnerability among their customer base.
“Consumer Duty is an ongoing priority for the regulator, particularly the treatment of vulnerable consumers.
“In its latest Regulatory Initiatives Grid and in recent comms, the FCA announced it will be assessing firms progress on vulnerability in Q1 2024.
“This should sound alarm bells to those firms still reporting few or even zero vulnerable customers, which is a clear concern.
“In reality, this is a sign of poor-quality data and a lack of a consistent approach to assessing and monitoring vulnerable consumers. With the regulator hot on non-compliance, this has to be a priority for all firms.
“After all, how can firms identify clients in difficulty if they haven’t fully evaluated their customer base.”
Nick Leeming, chairman of Jackson-Stops:
“The Bank of England has held firm with today’s decision, keeping a steady head and refraining from increasing rates, instead opting for a ‘higher for longer’ strategy to continue to drive down inflation.
“The steadier approach is welcomed by the market, avoiding spikes in payments and giving consumers a clearer pathway to be able to plan accordingly.
“This comes at a time where the holiday period will put consumer spending into the spotlight, where often affordability will be the lasting remark.
“Currently the market is not expecting a fall in rates for some time, with the Bank of England’s next few moves reliant on the UK economy continuing to avoid a recession.
“When it comes to property despite challenging headwinds, a resilient labour market and consistent demand has led to a market rebalancing rather than a fall.
“Positively, the wider property market is set to outperform forecasts from this time a year ago, proving its steadfast resilience once again, despite higher mortgage rates.
“Across our national network of estate agents, we are seeing buyer behaviour being driven by the right property in the right location, more so than any other defining factor.
“While local nuances are emerging due to supply levels, competition for prime homes that strike the balance between greater space and good connections will continue to drive activity and underline market confidence.”
Andy Sommerville, director at Search Acumen:
“The Bank’s decision to keep base interest rates steady today comes as no surprise, as they continue supporting the economy through this period of difficulty that is starting to show green shoots of recovery.
“However, for the property sector, we expect this decision to maintain the status quo, keeping property prices stable in the short term, but still leaving people feeling tangibly no better off.
“Though progress has been made to fight the ongoing inflationary pressures, the very high cost of borrowing remains a barrier for homebuyers and real estate investors alike.
“This, coupled with affordability issues as prices remain high, especially for first-time buyers, means we are unlikely to see growth in either market.
“Despite this, steady rates and some stability can provide a sense of reliability in uncertain times. Compared to the consistent increases we have seen previously, this may be settling for some.
“Homeowners and investors will need to continue to be savvy with their choices, examining where and what asset classes are outperforming the market, being more strategic than ever to push against these economic headwinds.
“One sure-fire way to improve the market in these challenging times is to improve the efficiency of the transaction process.
“Delays or incorrect data can be a headache for those who are trying to close deals for example, before a mortgage offer expires.
“The aim of the game now is to stop deals falling out of bed before too many external factors take hold.
“Technology is a ready and waiting solution. It will only be when we significantly digitalise parts of the system and connects these processes that will start to bear fruit.
“Quicker and more accurate transactions will give our current slow-moving market a boost, whilst also saving both individuals and businesses time and money.”
Adam Oldfield, chief revenue officer at Phoebus Software:
“After a year of ups and downs it is good to end the year on a more stable footing.
“Although rates aren’t yet going down, the fact that they are not going up is a relief. Borrowers and potential purchasers can’t have failed to notice that overall mortgage rates are coming down.
“This may give a boost of confidence going into the new year when things, historically, start moving.
“Given that a large number of properties have come to market across the country in the last month, we could see a real flurry of activity in January.
“The only sticking point would be if the inflation figure next week shows an increase. The unexpected fall in GDP yesterday has certainly given economists pause for thought and as wages continue to increase it is hard to predict what will happen next.
“On a positive note swap rates are still coming down, which gives lenders more scope to ease the borrowing burden for those coming off fixed rates and those hoping to take up new mortgages.”
Mark Harris, chief executive of mortgage broker SPF Private Clients:
“It comes as no surprise that the Bank of England has held interest rates at 5.25% for the third consecutive meeting.
“Weak GDP figures has increased the possibility that the next move in rates will be downwards and that could come sooner than many predicted.
“We expect base rate to be heading towards 4% by the end of 2024, assuming inflation also continues to move towards its 2% target.
“This would necessitate around three or four interest rate cuts next year – which would be welcome news for borrowers who are struggling with affordability.
“Lenders continue to reduce their mortgage rates for both new purchases and those remortgaging, increasing the choice for borrowers at more palatable rates with 2- and 5-year fixes available from less than 4.3%.
“Lenders are keen to lend and will want to do more business next year as this one has been disappointing, which is likely to mean further rate reductions.
“Those coming up to remortgage in the next few months will still face a payment shock as we must all get used to a higher interest rate environment, but it won’t be as bad as it could have been.
“Borrowers should plan ahead if they need a new mortgage next year and speak to a whole-of-market broker about the best deals available to them.
“Rates can be booked up to six months before required so if you reserve one now for peace of mind you can always switch onto a cheaper rate when you come to remortgage should a better rate become available.
“Many clients are opting for a shorter fix in the hope that rates will come down by the time they come to remortgage, when they can lock in for longer.
“Others who don’t need the certainty of a fix and are prepared to take a risk are opting for two-year trackers with no early repayment charges, as they plan to move onto a fixed rate once pricing should pricing come down further.”
Ben Thompson, deputy CEO at Mortgage Advice Bureau:
“The Bank of England deciding to hold rates for a third consecutive month brings relief to homeowners with mortgage deals expiring soon, and prospective buyers looking to get onto the property ladder.
“With more than a quarter (27%) of future homeowners citing higher interest rates as a barrier to their homebuying plans, today’s hold should be a welcome sign that we’ve now reached the peak.
“As we look at what this might mean for 2024, we expect the market to perform at a similar level to how it is now.
“It should then start to gather a little momentum as we head towards summer, and we may even just see a small cut in the bank base rate on the horizon too.
“Until then, the mortgage market has already seen drops in the swap rates used to calculate mortgage prices, and there is hope that today’s third consecutive pause might mean more reductions.
“However, those with mortgage deals about to expire should still err on the side of caution and look to act now, as it could be more beneficial in the long run. If in any doubt, always speak to a mortgage broker for advice.”
Duncan Kreeger, CEO and founder of real estate finance and investment platform TAB:
“We have all been crying out for stability, and today’s decision is hugely encouraging. The impact of the previous two decisions led to more enquiries and more people borrowing.
“Lenders have also been able to plan ahead and cut rates accordingly and we have seen more activity in the market as a result.
“We move into 2024 with confidence that interest rates have plateaued, which creates opportunities for investors and developers and foresight to homeowners going forward.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“Interest rate stability is exciting, helping re-build confidence for home buyers when it comes to taking on debt and improving activity in our offices.
“Of course, we would prefer to see a reduction in these historically high rates, but this is unlikely to happen anytime soon.
“Continuing falls in lender rates and inflation are the best we can hope for at the moment, which are contributing, along with healthy employment figures, to a more optimistic tone as we head into a new year!”
Anna Clare Harper, CEO of sustainable investment adviser GreenResi:
“The decision to hold base rate is helpful for housebuyers and sellers, as it contributes to relative stability.
“In truth, the bulk of the property market is on pause while the impact of recent rate rises feeds through into house prices.
“This pricing adjustment process takes time, partly because housing transactions are slow. It also takes time for expectations to adjust.
“Rather than buying or selling, those who can avoid it are on pause, with the result that housing transactions are down 21% annually.
“For investors, it makes pricing decisions easier, which means it’s easier to agree deals, and the gap between asking prices and offers remains wide.”
Matt Surridge, sales director at MPowered Mortgages:
“The market continues to benefit from increased stability across the board, reflected in a much more stable base rate from the Bank of England.
“However, it is important that borrowers and brokers are not unrealistic about what to expect over the coming year.
“Mortgage rates are likely to remain elevated over the next 12 months, and the impact of the cost-of-living crisis will mean many individuals are dealing with significant financial pressures on a daily basis.
“UK Finance data shows that 900,000 borrowers will experience ‘severe mortgage rate shock’ in 2024 when their existing fixed rate deals come to an end with monthly payments set to rise by more than £1,000 for some.
“This is worrying, which is why we believe rates need to come down at a much faster pace than is currently forecast.
“From a lending perspective, MPowered is committed to keeping rates as competitive as possible, while also focusing on increasing the speed and smoothness of the mortgage process. In this way, we can provide certainty and control to borrowers at a time when they need it most.”
Nicholas Hyett, investment manager at Wealth Club:
“The markets had hoped that Bank Governor Andrew Bailey would put a festive twist on his “sexy turtle” nickname with a dovish set of minutes accompanying the decision to hold rates flat in December.
“But there’s no “sexy turtle dove” in the pear tree this Christmas.
“A minority of MPC members voted to raise rates again, despite a slowdown in economic growth and weakening labour markets, with the minutes flagging geopolitical risks and potential for further wage growth.
“Government bond yields have ticked up and the UK stock market has slipped as a result.
“There’s logic to holding rates steady at the moment – central banks have a history of folding under the economic pressure and declaring victory on inflation too early.
“But, as we have said before, leave rate cuts too long and there’s a risk the interest rate cure becomes worse than the inflationary disease.”
Phil Lawford, national account manager at Saffron for Intermediaries:
“It is no real surprise to see the Bank of England maintain the base rate as it looks to restore stability after a fairly volatile year for the mortgage market.
“This should help to instil some much-needed consumer confidence, and in turn, drive market activity.
“A lot of buyers are still sitting on their hands hoping to see rates return to the record lows we saw during the pandemic, and, while rates are still competitive, it is unlikely that they will fall significantly in the next year.
“Brokers need to continue reassuring borrowers that there are solutions available that will work for them, and that they should press ahead with their homeownership ambitions if the circumstances are right for them.
“Rates can be unpredictable – for example, if you wanted to buy a house in 1971, when rates sat around 7%, but held off until they reduced, you would have been waiting for 22 years.
“And although it is often the focal point, the mortgage rate is far from the only factor that brokers should be highlighting to clients, particularly in the complex lending market.
“Brokers and client should both be thinking holistically as they look to find the best solution for their borrower’s individual circumstances, a task Saffron is always more than happy to help with.”
