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Bank of England interest rates held at 5.25%: Mortgage and Property professionals share their reactions

by | May 9, 2024

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After many ‘will they, won’t they’ conversations since the previous announcement, the Bank of England (BoE) have kept rates at 5.25% which is sure to disappoint homeowners once again.

House prices have started to stagnate as this week mortgage rates have begun to increase once again. A move which is continuing to make affordability a significant challenge for many of those who own their own homes.

The rise in mortgage rates has been in part due to expectations that the BoE will not make as many interest rate cuts this year as may have been previously thought. An expectation that has certainly borne fruit today!

Inflation has also remained stickier than many predicted, remaining at a current level of 3.2%, far above the target rate of 2% and this has meant forecasts for rate cuts have certainly been pushed back to later in 2024 at the earliest.

 
 

The MPC decision was split 7-2 in maintaining rates at their current levels. Is this a clue to future rate cuts – we don’t know. But we are certainly hopeful, as many other homeowners will be, that cuts are imminent.

In the meantime, Mortgage and Property professionals have been sharing their reaction to today’s interest rate news:

Kevin Roberts, Managing Director, Legal & General Mortgage Services, comments: “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.”

 

Henry Knight, MD of mortgage broker Springtide Capital, says: “Despite calls for the Bank of England to cut interest rates today, it was highly unlikely. The current market remains too unpredictable due to a number of outside factors, such as inflation. Although inflation levels have dropped compared to last year, the Bank still has some way to go to achieve the 2% target rate. Whilst this isn’t the news that house hunters had hoped for, we are optimistic that a rate cut is still on the cards later this year.”

Chris Little, Chief Revenue Officer, finova, said “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 £250 billion 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.”

 
 

Paul Glynn, CEO, Air, comments on the Bank of England’s interest rate decision: “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.”

Ben Waugh, Managing Director, more2life, said: “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.”

Ben Allkins, head of mortgages and protection at Just Mortgages, said: “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.”

Joe Pepper, UK Chief Executive Officer, PEXA, said: “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.”

Andrew Gething, managing director of MorganAsh, said: “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.”

Dean Butler, Managing Director for Retail Direct at Standard Life, part of Phoenix Group said: “Despite inflation falling closer to the Bank of England’s 2% target, interest rates remain stubbornly high, and held at 5.25% where they’ve been since last August. This announcement to hold comes against a backdrop of high wage growth and service sector inflation, and the United States Federal Reserve, which often influences decisions taken by central banks around the world, showing no sign of cutting rates either due to persistent inflation in the US. Several lenders here have recently raised their two and five-year fixed rate mortgage deals, factoring in a delay to expected rate cuts. With meetings in June and August, it’s possible that we’ll see the Bank of England deliver a base rate cut then, especially if inflation falls below 2% in May, June or July. In the meantime, what’s certain is that the current higher-interest rate environment is here to stay, for at least another month.

“High interest rates have an obvious impact in the here and now, but a prolonged spell of heightened borrowing costs could also complicate people’s plans for later life. As rates have risen, so has the temptation to take out ever longer mortgages and we’ve even seen the introduction of the 40-year mortgage. This might make sense for some, however it’s worth considering the potential retirement implications. For those starting out, the average first-time buyer in the UK is 34*, meaning that they would be 74, 6 years beyond their current expected state pension age if they took out a 40-year mortgage. Before making the decision, people should use an online pension calculator to check if their current level of pension saving covers the cost of mortgage repayments in retirement, as it’s highly unlikely that the state pension of the future will be sufficient to cover them as well as general living costs.”

 

David Rees, research analyst at Chestertons, adds: “With falling inflation behind schedule, the expected timing of the first rate cut of 2024 has slipped to September. The prospect of fewer rate cuts in 2024 has had a knock-on-effect on mortgage rates, which have risen as a result. Whilst this raises the cost of borrowing, we have not seen a discernible impact on demand in London, with sales up 27% in April from the same period last year.”

Josh Skelding, Commercial Director at Fignum, said: “The Bank of England’s cautious decision to hold off on lowering the base rate is a strategic move that reflects their careful approach to steering the economy through its recovery phase. It’s clear that we’re unlikely to see any cuts until the Bank is confident that inflation will stay at 2%, but a silver lining is that borrowers don’t seem deterred by current market conditions. The uptick in mortgage approvals signals a growing acceptance of a higher rate environment, and rather than being put off by recent repricing, purchase activity remains steady.

“Although we’re not completely in the clear, and the uncertainty of a general election could test the resiliency of the market once again, there are still deals available with much lower rates than this time last year paving the way for a buoyant summer.

 
 

“As the market gears up for summer, lenders must remain agile and lean on technology to enhance decision-making and boost customer satisfaction. To remain competitive in an increasingly dynamic market, it’s critical that they leverage cloud-based SaaS solutions to introduce new rates, products or propositions that leave prospective buyers in a strong position to find the right product for them.”

Tony Hall, Head of Business Development at Saffron for Intermediaries, comments: “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.”

Kevin Shaw, National Sales Managing Director, Leaders Romans Group said: “Maintaining the current base rate is a missed opportunity to stimulate economic activity. With inflation rising more slowly, the persistently high rates may unnecessarily constrain the economy— akin to wearing a “hair shirt” longer than necessary. This could adversely affect market sentiment, which is much more positive than a year ago. Furthermore high mortgage rates will exacerbate affordability issues for those getting onto the property ladder or renewing fixed-rate mortgages. A reduction in rates would have supported economic growth, and hesitancy to lower them might hinder the recovery in the housing market. 

Despite this, I would advise prospective homeowners or those considering a move to explore their options actively. With rates steady, house prices may start to move up, with an anticipated increase of around 20% over the next four years. Buyers should weigh the potential extra cost of purchasing a home over the next four years against the interest they would pay at the current rates.”

Nathan Emerson, CEO of Propertymark, comments: “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 per cent increase in the number of potential buyers registered, and an 8 per cent 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.” 

Kate Steere, housing expert at personal finance comparison site finder.com said: “As expected, the Bank of England has decided to keep the base rate on hold in today’s Monetary Policy Committee (MPC) meeting. This will no doubt be a huge blow to borrowers who were hoping for some relief for their mortgage payments, with many big lenders increasing their rates in recent weeks. The housing market is begging for some stability, and the most effective way to get these rates under control and encourage more activity in the market is to lower the base rate.

“The good news is that inflation figures for April are expected to have dropped significantly due to a fall in the energy price cap, and we already know that employment figures weakened in April. These are both strong indicators for the Bank of England to begin lowering the base rate in the next couple of months.”

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.

“Savings rates will also be impacted by any future BoE interest rate cuts. Though banks and building societies were relatively slow when it came to passing on higher interest rates, the same is unlikely to be said when it comes to lowering them. For those looking to lock their money away for a fixed term, it is a good idea to explore the interest rates available now as they are unlikely to remain at current levels for that much longer. If you have cash savings held in account without a fixed rate then it is also important to be aware that the level of interest you are currently earning will likely fall, so you should explore other options to ensure you are making your money work as hard as possible. If you have excess savings held in cash that you can put away for at least a few years, you may wish to consider investing it. Putting money to work in the stock market gives it the best chance to grow, and the sooner you invest and the longer you do it for, the more likely you are to have the potential for healthy returns.

“Wherever possible, you should seek professional financial advice to help you navigate the current landscape, and for anyone looking buy a new home in the near future, seeking professional mortgage advice will be vital. A mortgage adviser will be better able to keep up with any changes in the market and can help you explore the options available to you to help ensure you get the best possible deal for your personal circumstances. It is also worth remembering that if you are looking to take a new mortgage, particularly if you are remortgaging, securing a new product in advance will allow you to better understand what you will be paying and budget accordingly. Should rates drop between when you apply and when the new mortgage starts, with most lenders it is relatively simple to amend your application to a new revised, cheaper deal.”

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