Today’s announcement from the Bank of England regarding UK base rates had been nervously awaited by mortgage and property professionals. As expected, the MPC have kept rates at a 15 year high of 5.25%.
In their September meeting, the Bank’s MPC decided to keep the UK interest rate at 5.25% following a drop in inflation, giving some much needed respite for property markets.
Markets have been warned by the Bank to expect that interest rates will have to be kept higher for longer, something which has clear implications for mortgage and property professionals and their clients as the cost of living crisis continues to bite. Housing has become THE personal finance story of the year as the costs of owning or renting a property have risen exponentially. So what does today’s news mean for the property market?
Mortgage and Property professionals have been sharing their reaction to this latest interest rate news as follows:
Tony Hall, Head of Business Development, Saffron for Intermediaries said: “Today’s decision to maintain the base rate is another positive sign that the mortgage market is weathering the broader economic storm. This is especially poignant following the decision to stabilise rates in September, suggesting that we may enter the new year with a much more positive outlook than many expected at the beginning of 2023.
“Despite these signs of positivity, borrowers should still seek advice in order to navigate this complex market. Many customers will still be facing challenging financial situations, and the threat of payment shocks remain significant as they adapt to the new interest rate environment. Financial advisors can assist clients as they sail through these final choppy waters towards shore, helping customers find the best options available to them and ensuring they can fulfil their homeowning dreams.”
John Phillips, CEO of Spicerhaart and Just Mortgages said: “It is encouraging to see the Bank of England continue to hold interests rates, as the markets and the majority of economists expected. In reality, it feels like the only logical move as it’s still too soon for any reduction and an increase would just lump further misery and uncertainty on borrowers – especially as the Bank of England itself still doesn’t yet know the full extent or impact of its 14 previous rises.
“While inflation stagnated in September, the general consensus is it will continue its downward trend. In the mortgage market, today’s news will hopefully offer some stability and give lenders the confidence to take a further look at their books and continue to price more competitively. Even so, affordability remains a key blocker preventing many from pushing ahead with plans. With the expectation that rates will stay higher for longer, brokers must throw their arms around clients and educate them about the tools available to help make the numbers work and support borrowers of all backgrounds.
“With homeownership still a clear aspiration and a top priority for all the major political parties, it will be interesting to see what will be announced to encourage this important part of the economy as the election campaign gathers pace over the next 12 months. Increasing routes to homeownership, particularly for struggling first time buyers is absolutely critical in the current climate.”
Tony Silver, Director at White House Mortgages Ltd said: “The Bank of England have just voted 6-3 to keep interest rates on hold at 5.25%, which suggests that they will wait for the Autumn Statement before they decide what to do next on inflation.
“In the Mortgage World, we hope that the lenders will continue to reduce their rates in order to boost their market share. In my personal view, the mortgage market needs a period of stability to boost consumer confidence. We will all now wait and see what Jeremy Hunt does in the Autumn Statement.”
Arjan Verbeek, CEO and Co-Founder of Perenna comments: “Stability will be a welcome sight for many, but it doesn’t help reduce the uncertainty for homeowners who still have to deal with an incredibly volatile market. Neither does it improve housing affordability. Unless the standard variable rate reduces, which is the reference for stress testing, homebuyers will continue to struggle to get onto the housing ladder.
“Long-term fixed rate mortgages are the only real way to fix these systemic issues, and adoption of these models will create a fairly priced and affordable housing market. As the rate is fixed, there is no stress test, meaning homebuyers could borrow more on their income responsibly. The UK mortgage market must recognise the success of these models in Europe and the US in supporting homebuyers. Lenders, regulators and the government must act to help shift to provide a more secure and stable reality for homeowners.”
Paul Glynn, CEO, Air, comments: “After fourteen consecutive increases in the base rate, last month’s decision was a strong indication that the market was finally settling into a steadier groove. The decision today continues the trend, confirming earlier predictions by economists that inflation would drop to a more manageable level before the end of 2023.
“It is still essential that aspiring first-time buyers and existing homeowners lean on professional advice during this challenging time. An adviser can draw upon years of experience to help customers secure a deal that is tailored to their circumstances. This is especially true for the over-55s, who may be feeling the impact of inflation as it erodes fixed incomes and pension pots.”
Mark Tosetti, Partnerships Director at Movera commented: “As widely predicted the Monetary Policy Committee (MPC) have not rocked the boat and opted for a second successive pause.
“Perhaps the decision was not to take any chances, especially after the US Federal Reserve’s decision to keep rates unchanged yesterday, and the end of a year of rate hikes by the European Central Bank (ECB).
“The markets remain optimistic, buoyed by a recent drop in 2- and 5-year swap rates, but customer affordability needs to loosen in order to unlock greater product choice across the market.”
Thomas Jackson, Managing Director for Cooper Associates Mortgages, said: “The property market is beginning to slow down which is likely to be attributed to a tightening of budgets as we head into the winter months. National mortgage data showed that September was one of the quietest months for mortgage searches.
“Unfortunately, national data is also showing house repossessions and debt arrears are increasing – another reason why the property market is stalling. The nation is really having to cut the cloth accordingly and prioritise necessary spend over luxury spend.
“A base rate hold is the best way forward. Another 0.25% increase will have undoubtedly caused many lenders to increase rates. They wouldn’t have all be prepared to have their margins squeezed, so they would have needed to pass the costs onto customers.
“As we head into colder months and the financial strain of Christmas, an increase would have been an unwelcome move for many homeowners on variable rate mortgages, those who are coming to the end of their term, and frustrated first-time buyers who have been waiting for so long to get their feet on the property ladder. For some, it may have meant unmanageable housing costs.
“It’s likely, after six weeks of stability in the market, the decision to hold at 5.25% will enable this trend to continue. Tighter household budgets in Q4 may mean that inflation falls without another a base rate increase at all, but time will tell.”
Adam Oldfield, chief revenue officer at Phoebus Software, says: “We may not have had the ubiquitous crystal ball to help us predict the MPC’s decision today, but it turns out we didn’t need one. Keeping the base rate steady for another month is the sensible thing to do. We’ve been calling for the committee to give all the increases this year time to take effect and, although we know there are other factors at play, the overall effect is some breathing space and hopefully a boost to confidence.
“Lenders have been reducing interest rates recently as two-year swap rates fall below five per cent, so this hold from the Bank of England may well encourage more deals to come to market. The number of people coming off fixed rates is very high and many have been flipping onto SVRs, which is driving the cost of mortgage payments up past a point not experienced before. Arrears are increasing, which is almost inevitable, but perhaps those on higher rates may find better deals in the coming months?”
Joe Pepper, CEO PEXA UK said: “The decision to maintain the base rate will come as a welcome respite to borrowers who were worried about further rises on their mortgage repayments. We’ll see fewer borrowers having to scramble to lock in the lates deals, especially since the competitive repricing from lenders in recent months in an attempt to drive activity.
“While it’s possible that we have seen rates peak, the record-breaking interest rate spiral is still having an impact on the cost-of-living. Homeowners will still be looking to manage their finances closely.
“Despite the decision to maintain the interest rate, many borrowers who took out a two-year fixed rate mortgage during the Stamp Duty holiday in 2021 will still see a sharp increase in their renewal rate, Many will likely be hoping we are indeed at the peak of the cycle and lenders will continue to offer more competitive rates. At a time when speedy processing could be the difference in securing the most affordable deal, technological innovation will be needed. Digital remortgages are going to be key in transforming the property market, helping build capacity, reducing friction and providing customers with more choice in a market where consumer outcomes are at the forefront for the regulator.”
Adrian Anderson, Director of property finance specialists said: “Today’s decision by the Bank of England to hold interest rates at 5.25% comes as no surprise. Inflation remains at over three times the original 2% target set by the Bank of England, hence it would seem that the preferred ‘Table Mountain’ strategy is for a prolonged period of higher borrowing costs to tackle the issue rather than risk destabilising the economy with steep cuts.
“It may be time to settle into higher altitude borrowing for the foreseeable but for many UK borrowers, higher interest rates have already had a significant impact. Remortgaging is at its lowest level since January 1999 and the outlook for the housing market is weak.
“Higher interest rates are affecting mortgage affordability and buyer confidence, especially of ‘next time buyers’ who have become ‘wait and seers’, concerned the market will fall further. Existing borrowers also face the challenging decision of what rate to choose. 2-year fixed rate mortgage products are currently more expensive than 5-year products and today’s interest rate strategy suggests that rates may not go down as quickly as people hoped but will that 5 year fixed rate look very expensive in year 3, 4 and 5? Only time will tell.
“One group we are seeing taking action however is first time buyers who view this environment as an opportunity to get onto the ladder either now or in the very near future.”
Managing Director of House Buyer Bureau, Chris Hodgkinson, commented: “We’re seeing clear signs that the property market is now starting to stabilise, although transaction levels and sold prices remain down on the historic highs seen in recent years, as the higher cost of borrowing and wider cost of living continue to restrict home buyers.
“So today’s decision to hold interest rates should be viewed as a welcome positive for the property market and should allow buyers and sellers alike to act with a greater degree of confidence going into 2024.”
Nathan Emerson, Propertymark CEO, comments: “It’s a steady reassurance to see the Bank of England hold base interest rates 5.25% this time around. Many families continue to struggle regarding the cost-of-living crisis, and it will hopefully come as a potential encouragement to families there is no new elevated squeeze on their monthly budgets.
“Propertymark are still extremely keen to see both inflation and interest rates firmly come back under control once again. For a healthy property market, households need a longer-term confidence beyond only financially making it to the end of each month. It is encouraging to witness many buyers still having the confidence to enter the market currently, but we need to see stability and a firm end to the potential dread some people experience each time there is new interest rate decision.”
CEO of Octane Capital, Jonathan Samuels, commented: “The Bank of England seems to have tamed inflation to a degree, albeit it’s taken considerably longer than it should and remains some way off the two percent target.
“Given that there’s still a good bit of work to be done, today’s decision to hold interest rates won’t come as a surprise and we can expect the base rate to remain around five percent for some time yet.
“Of course, this ‘new normal’ has historically been the norm anyway and, as home buyers and owners adjust to this latest benchmark of borrowing affordability, we should see the property market stabilise and return to business as usual come 2024.”
CEO of RIFT, Bradley Post, commented: “Households across the nation will be breathing a sign of relief with interest rates remaining static in the run up to Christmas. This will, at least, provide some stability with respect to the cost of borrowing, particularly during a period where our household spend is far higher than usual.
“Of course, while positive, this still doesn’t detract from the fact that the cost of living remains substantially high and, as a result, a great deal of people will be facing another Christmas of cutbacks in order to make ends meet.”
Jason Ferrando, CEO of easyMoney says: “It would appear that the Bank of England is starting to get a handle on inflation but a freeze on rates was to be expected given that we’re not yet out of the woods.
“For the nation’s borrowers, this will do little to ease the financial pressure they are facing with the base rate remaining at its highest in over 15 years.
“The silver lining is that for those looking to accumulate a savings pot for future endeavours, returns are favourable, although how favourable depends on where and how you choose to invest your money.”
