In a widely anticipated move, the Bank of England has maintained the interest rate at 5.25%, marking the sixth consecutive hold at this 16-year high.
The Monetary Policy Committee voted 7-2 in favour of the hold.
This decision comes as inflation continues to hover above the Bank’s 2% target at 3.2%, despite recent declines. The steady rates reflect ongoing concerns about economic stability and the delicate balance required to manage inflation without stifling growth.
The Bank’s latest monetary policy decision was accompanied by forecasts predicting a slow but steady adjustment in the economy. While inflation has decreased slightly, it remains a significant concern that justifies the current rate, according to Bank officials.
The decision aligns with predictions from most economists and market analysts who had anticipated the hold due to the prevailing economic conditions. This morning markets had the chance of a cut pegged at 5%.
Yesterday brokers called on the Bank of England to “release its chokehold on the base rate” while earlier this morning the IEA’s shadow MPC said it would cut rates by at least 0.5%.
Reaction
Peter Stokes, director of mortgages at Davidson Deem:
“A shift from 1 to 2 votes for a cut does not sound much, but it means a lot. If inflation does fall significantly next month, the Bank of England are going to come under extreme pressure to cut base rate, and with only a sway of a further three votes on the committee needed, this could happen. We wait with bated breath for those inflation figures!”
Elliott Benson, owner at Sett Mortgages:
“Today’s hold is disappointing however it is looking like the end is near for rate rises and we should see a reduction on the horizon, potentially in June. This would get us back on track with fixed rate reductions and bring some much-needed positivity back!”
Samuel Mather-Holgate, independent financial advisor at Mather and Murray Financial:
“With inflation still above target, there’s no prospect of a rate cut any time soon. The Bank of England is backwards-looking, so won’t think about reducing rates until inflation is below target. This means we shouldn’t be expecting cheaper mortgage rates until the autumn. Bad news for the economy, businesses and households.”
Riz Malik, director at R3 Mortgages:
“June’s base rate decision will likely be a dress rehearsal for cut in August especially given the voting split. A cut of any size will inject confidence in the UK housing market as it highlights that the worst may be over.”
Nicholas Mendes, mortgage technical manager at John Charchol:
“Since the beginning of the year, the Bank of England has taken a more conservative stance than the markets initially anticipated. Originally, projections suggested a total of 150 basis points in rate cuts throughout the year. However, expectations have been significantly adjusted, with predictions now set for a cumulative reduction of only 50 basis points by December.
“The likelihood of a rate cut in June remains high, but this could be followed by an additional cut in either September or November. Nevertheless, if inflation and wage growth continue to exceed forecasts, the timing of these adjustments could be pushed back, potentially delaying the first rate cut until August.”
Karen Noye, mortgage expert at Quilter:
“We have been anticipating a turning point in the mortgage and housing market as we approach the summer months, and though we are yet to see an interest rate cut, the additional vote in favour of one at the Bank of England’s latest monetary policy meeting offers a glimmer of hope that rate cuts are edging closer. This could have a positive impact on mortgage rates in the nearer term given lenders price in rate cuts ahead of time and it still looks likely one could materialise in the coming months assuming the data continues heading in the right direction.
“A fall in mortgage rates would present a more favourable borrowing market for those buyers who have been sitting patiently in ‘wait and see’ mode which could help buoy the market. However, it is worth noting that we are likely to see a gradual fall in rates as opposed to a sudden drop even if the BoE does opt to cut rates at future MPC meetings.
“In the meantime, there are options you can explore that can help lower your mortgage rate further, such as putting down a larger deposit to decrease the loan to value level which can often help you secure better rates. The length of time you fix your mortgage deal for can also impact the rate you pay. Many five year fixes will come with lower mortgage rates than a two or three year fixed deal. However, given we are likely to see interest rates start to come down within this timeframe, it will be important to consider the longer term as if rates drop in the coming years then you could end up paying more than is necessary in the longer run if you lock in for a longer initial term at a time when rates are still elevated.
Ben Allkins, head of mortgages and protection at Just Mortgages:
“It’s hard not to see today’s decision as a missed opportunity, especially as inflation continues to head in the right direction. I know the central bank has many factors to consider and often follows the lead of the Fed and ECB, but further delays keep the economy fighting for life and risk derailing all the positive momentum we have seen in the mortgage market so far this year.
“Just recently, we have seen the impact of the changing expectations and a higher for longer mentality, with swap rates rising and lenders following suit across their product ranges. Even so, we’ve been encouraged by the high demand we have seen for valuations and appointments, demonstrating the growing confidence among clients. However, further delays make the job much harder for brokers to nurture and sustain this confidence. Thankfully, they are well placed to help clients navigate the market and identify the opportunities still available to make their plans a reality. It’s up to brokers to keep sharing this message and offering that five-star service.
“We have to hope that the Bank of England finally finds the confidence to pull the trigger on a base rate cut sooner rather than later.”
Ben Nichols, interim managing director at RAW Capital Partners:
“Cuts are coming, perhaps sooner than some might anticipate, but until there is certainty that inflation is not going to rise again the Bank of England will remain steadfast in holding the base rate where it is.
“That the base rate has remained static for nine months has afforded homebuyers and investors a degree of certainty. But higher borrowing costs will continue to squeeze house prices, and this will naturally weigh on the minds of both buyers and sellers. Moreover, it places the emphasis on how lenders and brokers can best support borrowers in this higher-rate environment.
“Flexible financial products, firm commitments, and transparent communication are all vital qualities that brokers and their clients need when looking to leverage opportunities as the economic horizon brightens. For lenders, therefore, meeting these commitments will help foster confidence among investors in the UK property market.”
Paresh Raja, CEO of Market Financial Solutions:
“We’ve known for some time that the Bank of England would not be cutting rates today. For the past two months or so, the question has been whether the first cut will come in June or August, and then how many cuts will there be by the end of 2024.
“When the base rate falls, and how quickly, remains to be seen. But the bigger picture is that the property market has slowly but surely gone through a period of adjustment over the past two months – the reality has sunk in that rates will not get back to the low levels many borrowers had become accustomed to throughout the 2010s.
“A base rate above 4% is highly likely for the next 12 to 18 months, and the sense of inertia is steadily fading away as buyers and investors decide to re-enter the market. So, now is the time for lenders to be flexible and embrace a ‘can-do’ attitude, ensuring the right products are available to brokers and their clients in a timely manner, allowing fresh life to be breathed into the market.”
Jonathan Bone, mortgage lead at Better.co.uk:
“The base rate hasn’t budged since last August, causing headaches for homeowners looking to remortgage and locking out first-time buyers struggling with sky-high prices. Inflation has dragged its feet coming down, which has pushed up fixed mortgage rates once more.
“But there’s a glimmer of hope on the horizon: the market is buzzing with predictions of a potential interest rate cut sometime between June and August. Yet, without a crystal ball, it’s impossible to say for certain whether this will materialise.
“If you’re due to remortgage very soon, it’s worth knowing that some lenders will charge you for sending someone out to value your property. If you then find a different lender offering better rates after a potential Bank of England rate cut, you won’t get a refund for that original valuation, leaving you out of pocket. So, if you’re playing the waiting game to see what interest rates are doing over the next few months, be aware that not all lenders will charge you a valuation fee so speak to a mortgage broker who can point you in the direction of the lenders who offer a free valuation.”
Ryan Davies, strategy director at Bluestone Mortgages:
“Today’s decision will no doubt be a blow for would-be and existing borrowers who were hoping to see interest rates come down and mortgage payments to ease. Rates remain at their highest level for 15 years, putting sustained pressure on household finances and leaving many feeling squeezed.
“For those concerned about how ongoing affordability challenges will impact their homeownership ambitions, remember that there is always help at hand. Whether that be getting in touch with their mortgage lender, or speaking with a broker to understand the different options available, it’s our duty as an industry to help these customers step onto or up the property ladder.”
Tony Hall, head of business development at Saffron for Intermediaries:
“Although the base rate has been held today, it’s been really positive to see the conversation shift from if it will fall to when. The outlook for the mortgage market remains positive, with mortgage approvals rising for the sixth month in a row in March and the number of homes for sale in Q1 also rising by 9% year-on-year. Average rates have fallen from their summer 2023 peak and lenders are continuing to compete on price to attract buyers. The mortgage market is clearly on a stronger footing and we’re confident that over the coming months, we’ll see more activity as our sector goes from strength to strength.”
Andrew Gething, managing director of MorganAsh:
“Even the biggest advocates for a cut to base rate would be unsurprised by today’s news, given the central bank’s continued emphasis on keeping rates higher for longer. News from their counterparts across the pond and on the continent will have only confirmed that view.
“While stability is of course no bad thing – especially for those on variable or tracker rates – it does mean that the prolonged financial pressures facing many borrowers will only continue. This is significant given the huge emphasis that has been placed on vulnerability by the likes of Consumer Duty, pushing firms to be alive to the challenges facing those clients in difficulty. As those pressures continue, it’s never been so important to know who your vulnerable customers are and what outcomes they are receiving.
“Consumer vulnerability continues to rise up the agenda, with the FCA’s ongoing review of how firms approach vulnerability, or our very own chair discussing vulnerable policies and practices on BBC Breakfast or Good Morning Britain. Whether it’s the public sector or regulated sectors, the scrutiny is real and expectations are high. That’s certainly true as pressures persist and a potential cut to base rate continues to look further away.”
Nick Leeming, chairman of Jackson-Stops:
“The Bank of England has taken a ‘no news is good news’ approach to today’s decision, opting to hold firm for another six weeks. While no change was widely assumed, the expectation is that June’s meeting will finally break the base rate deadlock and initiate a rate cut.
“The Bank of England’s hawkish approach may not be headline grabbing, but at least it isn’t a distraction for buyers or sellers who want to press on with their sales and searches. While everyone in need of a mortgage would prefer rates to fall significantly, interest rates of around 5% are not high by historic standards.
“It’s important to keep in mind that, while the past 18 months have been a time of economic headwinds, the exceedingly low rates that became the norm in the 2010s were the exception and not the rule.
“A pivot towards lower rates in June, 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.
“For now, today’s ‘hold’ should help to maintain the fragile momentum we’ve seen building in the housing market recently. Across the Jackson-Stops network in April we have seen a year-on-year uptick in viewings, new instructions and new buyer enquiries, which bodes well for a busier second half of the year.”
Nathan Emerson, CEO of Propertymark:
“As interest rates continue to remain the same in order to combat levels of inflation this country has not witnessed for decades, Propertymark is optimistic that buyers will continue to adapt to these new market conditions. Our own Housing Insight Report discovered that there has been a 4% increase in the number of potential buyers registered, and an 8% increase in the number of available properties to rent, which shows that there are some reasons to remain optimistic that the housing market is recovering from shock economic factors from the last three years.”
Amy Reynolds, head of sales at Richmond estate agency Antony Roberts:
“It is not surprising that the Bank of England held rates again at 5.25%.
“If the inflation target is hit, we could see a rate reduction next month, which will stimulate borrowing if lenders also reflect this in lower mortgage rates at circa 4%.
“In an election year, the government will be very keen to be on track with its inflation forecast, as any positivity helps consumer confidence and the property market. The market relies on confidence; stable interest rates mean a stable, albeit relatively dull, market.
“A rate reduction as soon as possible will be pivotal in stimulating activity in the property market.”
Tomer Aboody, director of property lender MT Finance:
“This decision is likely to be the final rate hold, with the eagerly-awaited first reduction in base rate coming at June’s MPC meeting.
“With inflation increasingly coming under control and a general election looming, although when this will happen is anyone’s guess, one or two rate reductions over the coming months would be welcome. This will significantly boost buyer and seller confidence, which is so vital for encouraging activity in the housing market.”
Joe Pepper, UK chief executive officer, PEXA:
“A decision to hold the interest rate is no real surprise, but a disappointment nonetheless for borrowers hoping to see it slashed. Inflation, though dropping ever so slightly, is clearly still top of mind for the MPC, leading us all to await a first cut in either June or August.
“It marks another blow for the housing market, which is seeing reduced activity as potential buyers await a reprieve in costs and remortgagers understandably wait for lower rates. As such, demand is building, and we must use this time to prepare to deal with the surge when rates do eventually drop. Lenders and conveyancers just want to provide the best service, but they still have to rely on antiquated infrastructure. When the surge in demand does inevitably come, they’ll be forced to put their foot on the accelerator with the handbrake still on.
“Widespread digital transformation is the only thing that can address the current inefficiencies in the system, radically speed the process up and free up conveyancers so that the system can support buyers when they take advantage of falling rates.”
Chris Little, chief revenue officer, finova
“As we approach the midpoint of 2024, the base rate has remained stubborn, sticking to 5.25%. The market has entered a new phase of stability, and the top six lenders now expect that gross lending will reach a healthy £250bn in 2024, buoyed by strong product transfer activity and relatively consistent swap rates. However, there is a slight lingering air of uncertainty in the market. Given the current electoral cycle, it’s possible that many first-time buyers will stay put, and a mixture of cost-of-living pressures and affordability hurdles will also influence their decision-making.
“In a highly competitive market, lenders must offer personalised rates that suit the individual financial profiles of borrowers while not endangering the lender’s liabilities. As we know, buying a house is the single biggest purchase most people will ever make. As UK Finance reported, almost one in five first-time buyers were borrowing with a term of over 35 years in 2023. As such, lenders should take full advantage of technology to provide truly tailored pricing, creating a scenario where buyers can access the most affordable rates without any risk to the lender’s liabilities. The future is flexible pricing that can adapt to real-time market trends at speed – and the way to get it is through more dynamic pricing platforms.”
Ben Waugh, managing director, more2life:
“The Bank of England’s decision is unsurprising, as many predicted that cuts will be held until there are further improvements to inflation and pay growth. The volatility of 2023 may be a distant memory, but the market is yet to enter the stable period that many industry commentators believed was right around the corner. Nevertheless, there are reasons for borrowers to feel optimistic. Homeowners on fixed rates can look forward to the possibility of reductions later in the year, and lenders are also relatively confident – swap rates have remained consistent, and product transfer activity is increasing.
“Of course, we must accept a few salient truths despite industry optimism for cuts later in the year, challenges remain. Affordability is a huge obstacle for first-time buyers. According to UK Finance, a record one-five five first-time buyers bought a mortgage with a term of over 35 years in 2023. The numbers are unequivocal: more and more homeowners will be shouldering their mortgage payments for longer – some older borrowers may have to reckon with managing mortgage debt into their retirement. In such a time of transition, homeowners and first-time buyers alike must seek the seasoned guidance of a professional adviser, who can help borrowers explore their financial options.”
Matthew Kimber, CEO of Molo:
“Despite recent pressure on sterling and volatility in the swap markets, the Bank of England (BoE) has maintained interest rates at 5.25% for the sixth consecutive time, in line with market expectations. Looking forward, we believe a first-rate cut will potentially occur in August, which will provide some relief for mortgage holders as we head into the Autumn.
“The BoE’s decision reflects a cautious approach to balancing economic stability and inflationary pressures. For borrowers, stable rates at least offer financial planning stability, allowing landlords to benefit from predictable costs, aiding financial management and promoting stability in the rental market.”
Neil Rudge, head of enterprise at Shawbrook:
“While a cut may be on the horizon sometime later this year, the Bank likely wants more data to confirm the inflation slowdown. This period of stable rates presents a valuable opportunity for businesses to reassess their plans but the positive signs of economic recovery should boost confidence for SMEs, potentially leading to increased investment and growth.”
Paul Glynn, CEO, Air:
“Today’s decision to maintain the base rate at 5.25%, while not the news many hoped for, keeps the market on a stable footing. Those on variable rates and trackers may be disappointed, but borrowers on fixed rates remain hopeful for reductions later in the year. Falling inflation also continues to ease the financial squeeze, meaning a lower base rate this year is a question of when, not if.
“While there is light at the end of the tunnel, the situation is challenging for some borrowers. Thanks to a distinct imbalance between house prices and wage growth, more older borrowers will have to come to terms with managing mortgage debt in retirement. The market has undergone irreversible changes and advisers must acknowledge the reality of the situation. Engaging in conversations with consumers on working solutions, including later-life lending, at an earlier stage must become the norm to secure good customer outcomes.”
Kevin Roberts, managing director, Legal & General Mortgage Services::
“There is no doubt that the market is not only busier, but also in a more robust position, than it was last year. The question on everyone’s lips is now ‘when’ and not ‘if’ we’ll see that reduction in the base rate.
“Those buying and remortgaging have enjoyed the competition on pricing that we’ve seen so far in 2024, with average rates comfortably below the figures we saw last summer. We are seeing strong demand across the board but particularly from first-time buyers, who are being helped by wage inflation and house price stability, as well as wider inflation edging down slightly.
“Nonetheless, the market remains slightly sensitive to pricing changes, and some buyers are holding out for further rate drops before taking the next step in their homebuying journey.
“Whatever your next move, we always recommend consulting a professional mortgage adviser before committing. Advisers are trained to navigate the complexities of the market, and are poised to offer tailored support throughout what’s likely to be the largest purchase of your life.”
Stuart Cheetham, CEO of MPowered Mortgages:
“With each passing month the Bank’s inflexible interest rate policy is becoming a more bitter, and less effective, pill to swallow.
“While inflation is coming down slower than the Bank would like and tomorrow’s GDP data is expected to show that the UK dragged itself – just – out of recession in the first quarter of the year, neither of these factors justify prolonging the pain of high interest rates any longer than necessary.
“The Bank’s monetary policy medicine now runs the risk of doing more harm than good.
“High interest rates are undermining business confidence and have slammed the brakes on both the mortgage and property markets.
“The number of mortgages approved in March inched up to its highest level in 18 months, but the rate of growth slowed to a crawl – up just 1.4% compared to February.
“The high cost of borrowing is feeding into the housing market too. Property prices are flatlining or falling many areas, and the latest PMI data showed that the rate of housebuilding in April contracted at its fastest rate since January.
“With housebuilding stagnating and the property market treading water again, both are proving collateral damage of high interest rates.
“Individual lenders are doing what they can to make mortgages more affordable – at MPowered we reduced our interest rates by up to 0.65% this week – but mortgage rates are ultimately a reflection of swap rates and we need the Bank to act decisively, and soon, if we are to return to anything like a normal market this summer.”
Robin Rathore, CEO, Bamboo Auctions:
“While holding the base rate provides stability to the wider economic environment, the sector remains fragile; fall through rates are high and news of mortgage rate increases are not giving any comfort to buyers or sellers.
“We’re seeing more activity in the market than we were 12 months ago, and this is partly down to rising payments as mortgage terms come to an end pushing many to sell. Sensible pricing remains the key determinant for vendors who are looking to sell quickly. We’ve also seen a 30% increase in the number of sellers listing for sale by online auction through our agent partners, as sellers desperately seek more speed and certainty in their transaction.”
John Fraser-Tucker, head of mortgages at online mortgage broker Mojo Mortgages:
“In a move that has likely disappointed many existing and prospective homeowners, the Bank of England (BoE) Monetary Policy Committee announced today that they continue to hold the base rate at 5.25%. It’s been held at this level since August 2023, with the last in a succession of 14 increases.
“Several economists expect that the BOE will start to reduce the base rate by the end of the year, with some estimating June, and others as late as September for the first rate cut. However, it’s impossible to predict for certain.
“In the past few weeks, we’ve seen mortgage rates begin to edge up again. We decided to look at the impact that the base rate decisions have had on our first-time buyer customers to date.”
Sam Jordan from Search Acumen, property data and insight provider:
“Today’s announcement reinforces that talk of turning a corner may have been premature. As we have seen over recent weeks, despite falling inflation and a stable base rate, major banks are still increasing the cost of borrowing.
“This is based on the belief that rate cuts from the Bank of England may now be further away and slower than initially expected at the start of the year. Should the economy continue to follow its current course, it will eventually support growth and improve investor confidence.
“However, this year will continue to be challenging for borrowers and there will be a longer lag before improvements in the macro-economic landscape filter through into the real-world experiences of homeowners and real estate investors.”
