"We still expect the Bank Rate will reduce this year, however, this is happening much later and slower than we had anticipated earlier in the year"
- Paul Broadhead - BSA
UK interest rates have been left unchanged at 5% by the Bank of England.
The Bank of England's Monetary Policy Committee voted 8-1 in favour of holding the interest rate at 5%, with just one member of the committee voting in favour of another cut.
In August, at the last MPC meeting, it was a much closer split with members voting 5-4 in favour of a cut.
Many economists predict that a further rate reduction will come at the next meeting in November.
Following the news, the property industry was quick to react. Here's what they're saying:
Simon Gammon, Managing Partner, Knight Frank Finance, said: "Caution from the Bank will have little impact on the slow, downward trajectory of mortgage rates. Global inflation looks increasingly benign, so much so that the Federal Reserve opted for a bumper 50 basis point cut yesterday. That brightening global picture is pushing swap rates down, giving the lenders leeway to keep cutting.
"Wednesday's UK inflation data did little to change the narrative that the Bank of England has the wiggle room to cut the base rate once or twice before the end of the year, which should help usher in sub-4% two-year fixed-rate mortgages.
"While that's higher than most people are used to, rates at that level are palatable and will support a sustained recovery in housing market activity. During the past two years, the property market has been dominated by people who really need to move, but we're already seeing more discretionary buyers seeking to make purchases. Buyers are generally more confident, too. Caution is giving way to conversations about how much people can borrow, and whether they might be able to stretch themselves to purchase a larger property."
Nathan Emerson, CEO of Propertymark, comments: “Since the initial rate cut a few months ago, many people will have been closely awaiting any further anticipated cuts, however, it remains crucial the Bank of England continue to implement cuts in a controlled and functional manner, as not to fast reverse the economic progress so far.
“Bearing in mind yesterday's figures regarding inflation, it is understandable why the decision to hold the base at current levels has been employed. Propertymark remains keen to see full consistency within the wider economy and for any eventual base rate cuts to create a pathway for people that provides long-term stability, confidence and affordability.”
Paul Broadhead, Head of Mortgage and Housing Policy at the BSA said: “Following the cut in the Bank Rate last month, almost half of UK adults (44%) thought that based on the current economic conditions the Monetary Policy Committee should have reduced the Rate again today.
“The cut in the Bank Rate last month marked a significant turning point in what had been a difficult two and a half years. However, in reality shaving just 0.25 percentage points of the Bank Rate has not made a significant impact on mortgage affordability or confidence in the housing market, despite markets pricing it in to mortgage rates.
“First-time buyers, who are critical for a properly functioning housing market, are still indicating that they are unable to afford homeownership. The Building Societies Association’s latest Property Tracker Report issued today shows that the affordability of monthly mortgage payments continues to be the biggest barrier to buying a home, with almost two-thirds (61%) citing this. Over half (55%) said raising a deposit is an obstacle to them being able to take a step on the property ladder
“We still expect the Bank Rate will reduce this year, however, this is happening much later and slower than we had anticipated earlier in the year.
“Anyone who is concerned that they may experience financial difficulties in the coming months should contact their lender as soon as possible, preferably before missing any payments. Lenders have a range of practical, tailored support available to anyone who may be struggling.”
Matt Smith, Rightmove’s mortgage expert said: “We’re still expecting two rate cuts before the end of the year, and home-movers should continue to see a downward trend in mortgage rates this side of Christmas.
"I think overall, there’s likely to be quite a moderate response from lenders in response to today’s news – and whilst rates should continue to come down, mortgage lenders’ funding costs are unlikely to come down significantly, which wouldn’t leave heaps of room for dramatic mortgage rate cuts.
"However, we’ll monitor how things play out over the coming days, and I think we could see a mixture of some lenders holding rates while others cut further to drive up pre-Christmas business. Overall, I think there’s an optimistic mood about where we’re heading, and lowering mortgage rates is supporting the increased home-moving activity we’re seeing right now, particularly against last year."
Matt Thompson, head of sales at Chestertons, says: “With inflation ever so slightly above the 2% target, it was unlikely for the Bank of England to announce a rate cut but more probable following the next Monetary Policy Committee meeting on 7th November. In the meantime, buyer interest has picked up since interest rates were reduced to 5% in August. At the time, the rate reduction boosted buyer confidence which led to more house hunters resuming or starting their property search.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, says: “All the signs were pointing to a rate hold this month, so it’s not hugely surprising that the Bank of England has kept rates at 5 per cent. With inflation sticking above the 2 per cent target and expected to edge up in the autumn, the Bank was always likely to remain cautious although the markets still expect at least one further rate reduction before the end of the year, perhaps in November.
“There is a strong argument for the Bank to get on and cut rates again, giving borrowers an affordability boost, easing pressure on household finances and in doing so, assisting the wider economy. If worries about the Budget are realised, the need to boost transactions and activity in the housing market will be all the more apparent.
“However, while the Bank of England has failed to take action, lenders are reducing their mortgage rates regardless as they compete for business. Mortgage rates continue to soften, with Santander introducing a sub-4 per cent two-year fix on the back of the lowest two-year Swap rates in two years. There are also plenty of five-year fixes at sub-4 per cent for those looking for certainty over a longer period.
“While rock-bottom rates have long gone, these reductions in mortgage rates are giving borrowers some comfort after a prolonged period of rising pricing. Competition between lenders is likely to mean further gentle reductions in mortgage rates as they vie for new business."
