Editor's note: This brief was summarised by The Property AI Newsroom from a report by Mortgage Strategy. Read the original article for full details.
Bank of England Holds Base Rate at 3.75% as Market Expects Future Rises
The Bank of England’s Monetary Policy Committee (MPC) has voted to maintain the base rate at 3.75%. The decision was made by a majority of 6–3, with three members voting to increase the rate to 4%.
According to Mortgage Strategy, the MPC’s decision to pause the base rate was taken to help keep inflation under control. The committee noted that energy prices have remained volatile and higher than before the recent conflict in the Middle East, and that the impact of this energy shock on the UK economy remains uncertain. The MPC stated that while monetary policy cannot influence energy prices, it is being set to ensure the economic adjustment achieves the 2% inflation target sustainably.
The market has accepted the decision to hold the base rate, but there is an expectation that future rises may be necessary. The MPC indicated that the policy stance required to achieve its inflation target will depend on the scale and duration of the energy shock and its effects on the economy, including through financial conditions.
For letting agents and inventory clerks, the decision to hold the base rate may provide some short-term stability in the mortgage market. However, the report notes that swap rates, which influence fixed mortgage pricing, have already moved in anticipation of future base rate changes. As a result, mortgage product pricing may not remain static, and affordability concerns persist for borrowers, with many moving from cheaper fixed rates to more expensive deals.
The MPC’s decision marks the fifth consecutive time the base rate has been held steady. However, the market and commentators cited by Mortgage Strategy suggest that further increases could be on the horizon, depending on economic developments and inflation trends.
Source: Mortgage Strategy