Editor's note: This brief was summarised by The Property AI Newsroom from a report by Mortgage Solutions. Read the original article for full details.

Base rate hold offers little relief as lenders price in future hikes

The Bank of England's Monetary Policy Committee has held the base rate for the sixth consecutive time, but industry reaction suggests borrowers and buyers should expect little lasting comfort. Commentators say lenders and financial markets expect a rate rise soon, and mortgage products have already become more expensive.

A welcome but momentary reprieve

Nigel Bishop, founder of Recoco Property Search, said the hold was welcome because a hike would have had a "crippling effect on an already stagnant property market". The decision offers some relief to buyers and borrowers due a renewal, but he noted this will only be momentary, as mortgage products have already become more expensive. Bishop added that a hike later this year is still very much on the table, but the Bank of England probably first wants to see whether next month's Autumn Budget introduces policies that tackle inflation.

Inflation pressures in focus

Inflation data this week showed a rise to 3.1% in August. Julian Jessop, economic fellow at the Institute of Economic Affairs, called the MPC's decision "understandable" but said it risked the committee being accused of "kicking the can further down the road", arguing a small increase now might have reduced the need for larger increases later.

Ben Allen, managing director of The Right Mortgage & Protection Network, said the inflation rise was in line with expectations and mainly driven by fuel, so the MPC concluded there was not yet sufficient evidence the pressures require another increase. However, he said inflationary risks had not disappeared, raising the question of whether a hike had simply been postponed.

Mortgage rates already moving upwards

Allen said the hold felt "slightly irrelevant because change is taking place anyway". Swap rates and lender funding costs have risen, mortgage rates have been moving upwards, and the widespread product price reductions seen earlier in the year have become a distant memory. Some lenders have repriced more than once in a week, and advisers are working increasingly hard to meet product and rate withdrawal deadlines for their clients.

Anthony Curtis, director of mortgage broker Forto Finance, said he was surprised the Bank did not increase rates, adding that many lenders likely feel the same and have been pricing a rate rise in. While the hold provides stability, he warned people shouldn't get too comfy, saying a rise next month is "pretty much nailed on" and represents nothing more than a delay.

Mark Harris, chief executive of SPF Private Clients, said pressure was on Governor Andrew Bailey and the MPC to follow the US Federal Reserve and European Central Bank after their rate rises, but they resisted. He called this a cautious response that was correct for now, as it provided stability.

Attention now turns to swap rates, the inflation outlook and next month's Budget and accompanying OBR forecast, and what they might mean for households, the economy and the mortgage market.