Editor's note: This brief was summarised by The Property AI Newsroom from a report by The Negotiator. Read the original article for full details.
Bank of England holds interest rates at 3.75% amid inflation concerns
The Bank of England has held interest rates, in what may be a blow for borrowers hoping for cheaper mortgages any time soon. The Monetary Policy Committee (MPC) voted by a majority of 6–3 to maintain Bank Rate at 3.75%, with three members voting to raise it by 0.25 percentage points to 4%.
The hold comes as Governor Andrew Bailey and the MPC remain concerned about inflation staying high at 3.1% and swap rates rising, which has already prompted mortgage lenders to hike rates. Most analysts had expected another hold, but the US Federal Reserve's decision to raise rates this week had prompted speculation that the UK central bank could follow.
What industry voices said
Neil Louth, Group Executive Director at LRG and Chief Executive of the Acorn Group, described the decision as providing a welcome window of stability ahead of the Budget on 28 October and the Bank's next decision on 5 November, ahead of which markets are increasingly pricing in the possibility of a rise. He noted that people with a genuine reason to move are still transacting, and that there are early signs of some landlords returning where corrected prices are creating better long-term value. He also said that in prime central London, values are approximately 24.5% below their 2014 peak and around 50% lower after inflation.
Verona Frankish, Chief Executive of Yopa, said the hold will at least provide some predictability for homebuyers, and that the market has already shown it can function with rates at their current level.
Jeremy Leaf, a north London estate agent and former RICS residential chairman, said a rise in interest rates is becoming increasingly likely, and that the impact of an uplift on an already fragile, price-sensitive housing market would not be helpful. He noted that swap rates are at a three-year high, prompting lenders to push up their mortgage pricing.
Nick Leeming, Chairman of Jackson-Stops, said the hold offers some relief for buyers and those on variable-rate mortgages, but that a number of lenders have already begun repricing mortgages upwards as markets increasingly price in the prospect of a rise following the Budget. He added that mortgage rates do not move in lockstep with the base rate.
What this means for agents
For letting agents and inventory clerks, the hold offers short-term stability in borrowing costs, but rising swap rates and lender repricing point to continued uncertainty around mortgage affordability. Louth's comments on landlords returning where prices have corrected may be of particular interest to agents working in the lettings sector.
Source: The Negotiator