Reaction to Bank of England base rate hold

The Bank of England has, as was widely anticipated, confirmed the Monetary Policy Committee has held base rates at 4.5%. Despite hope for further interest rate falls in 2025, many commentators felt a further cut was unlikely so soon after February’s decision. And while inflation, currently 3%, remains above the Bank of England’s target of 2% further interest rate cuts are likely to be few and far between. 

After the sizeable increases in base rate over the last 18 months, lenders have reacted to greater stability according to Rightmove’s latest weekly mortgage tracker. The lowest available mortgage rate is now a 2-year fixed rate, for those with a 40% deposit.

Matt Smith, Rightmove’s mortgage expert said

“Average mortgage rates at the top-end of the market have fallen more quickly than for those with the smallest deposits over the past year. Someone with a 10% deposit is still looking at an average 5-year mortgage rate of 4.91%, only slightly down from 4.99% at this time last year. By contrast, today someone with a 40% deposit is now looking at an average 5-year mortgage rate of 4.20%, down from 4.36% – and we are still seeing some products below the 4% mark in this bracket. So while borrowing power has improved for first-time buyers, higher, and slower falling, mortgage rates for those with smaller deposits is still stretching affordability.”

Source: Rightmove

Calling on lenders to go further Samantha Lindsay, Mortgage and Protection Adviser at My Mortgage Angel, said

“The hold on the interest rate today was widely expected and comes as no surprise. There is still too much uncertainty in the world – between US politics, global economic instability, the heightened situation in Ukraine, a looming Budget announcement and inflation still a point away from target, lots of factors need to stabilise before further cuts are likely.”

“We briefly saw the return of sub 4% mortgage rates last month, but these were just flashes in the pan. Some lenders offered these then withdrew them at short notice which just created more panic and uncertainty for borrowers. What we really need to see is lenders working together to create a more sustained move towards lower mortgage rates for all.”

Robin Rathore, CEO of Bamboo Auctions, said the stability of the hold is welcome:

“Although inflation has increased slightly over the last few months, its sensible to hold rates as they are. The mortgage market appears to have already priced this into the rates on offer so we don’t expect to see any significant impact to the property market following this month’s announcement.

“The stability is welcome and we are seeing a number of great opportunities coming to market. Now is a great time to sell and the agents we work with are seeing faster transaction times with strong bids and offers being placed online by buyers across the country. As we head towards the seasonal spring bounce we expect to see more active buyers coming to the market and more sellers looking to list their properties.”

Paresh Raja, CEO of Market Financial Solutions, said:

“The past six months have shown that predicting base rate movements is never straightforward. The hope had long been that once inflation was brought under control, the Bank of England would rapidly reduce rates. But this was over simplistic; it overlooked the myriad other factors at play – economic and politically, domestically and internationally, the landscape is constantly evolving, and while further cuts to the base rate are still expected this year, it is likely that the central bank will remain cautious. Today’s decision reflects that.”

“Where the property and mortgage markets are concerned, it is important that neither complacency nor inertia are allowed to set in. Sitting tight in the assumption that rates will tumble could prove risky. With data showing that house prices and buyer demand are on the rise, the market will clearly move ahead. So, the focus from lenders when serving brokers and borrowers has to be on delivering products and services that give clients the confidence to act in the here and now, with flexibility and optionality remaining key qualities in achieving this.”

And looking ahead to the Spring Statement Darrell Walker, Group Sales Director at ModaMortgages, added

“The market widely expected a hold today, and with analysts forecasting at least a 0.5% reduction in the base rate by the end of 2025, this decision is unlikely to slow activity. As ever, speculation is rife as we head into next week’s Spring Statement and, beyond that, the start of a new tax year. With this in mind, rather than focusing on when the next cut might come, lenders should prioritise agility, ensuring brokers and their clients have both the products and support they need to get deals over the line.”