Bank of England interest rates hold steady at 5.25%: Mortgage and Property professionals share their reaction

The Bank of England and the MPC have hit pause again on interest rates following their most recent previous announcement, holding them steady at 5.25% for the fourth time in a row.

Whilst a hold is better than a rise, there will be plenty of disappointed homeowners out there who were hoping that a decrease in rates was on the cards to provide a bit more relief to what is usually, the largest household expense, the mortgage.

Borrowers did receive some good news, as lenders started to reduce their fixed-rate mortgage deals, bringing levels down to their lowest since 2022. But with this announcement today will that continue, or will they start to creep back up?

With the MPC being split with a majority of 6-3 in a similar way to the last few votes, there is optimism in the sector that rates will start to decrease as we move through 2024 and then lenders will follow suit. We will be on the lookout for clues on when interest rates might start to fall.

In the meantime, Mortgage and Property professionals have been sharing their reaction to today’s interest rate news:

Paul Glynn, CEO, Air, comments: “It may come as welcome news for prospective buyers that the Bank of England has decided to keep the base rate steady. We’ve already seen a number of lenders reduce rates and a stable interest environment will only help this along. But whilst this is great news for those borrowers who are still working, for those in or approaching retirement there are wider considerations at play.

“The cost of living crisis and affordability issues are still causing financial stress for many individuals on a fixed income. Rate stability is a positive thing, but it must be matched by suitable products tailored for the older generation. Advisers should be prepared to have comprehensive conversations with their customers in order to find a solution that works for them, whether that is a traditional mortgage or otherwise. The Bank of England is preparing the stage for a better 2024, but it’s up to advisers and later life lenders to ensure that older borrowers can benefit.”

Matt Surridge, Sales Director at MPowered Mortgages, comments: “The Bank of England’s decision to hold the base rate at 5.25% today sends a strong message of confidence in the economic turnaround, which is great news for those eyeing their next move in the housing market. Although December saw a modest increase in inflation to 4%, up from 3.9% in November, with energy bills projected to fall, the prospect of rate cuts later this year is increasingly likely, with some forecasts suggesting rates could drop to 3% by 2025.

“We must not overlook that many borrowers are battling with increased living costs. Despite a slowdown in inflation, mortgage rates are still higher than the historical lows of recent years. In this economic landscape, the role of brokers and lenders in actively aiding borrowers and leveraging their expertise for the best outcomes is more important than ever.

“At MPowered Mortgages, our AI and data-driven process can rapidly process complex applications to provide certainty and control to consumers throughout a more challenging period.”

Arjan Verbeek, CEO of Perenna said: “The Bank of England’s base rate remains unchanged and so do the problems faced by millions of homeowners. Although this may be a slight relief for some, too many are faced with the risk of their mortgage repayments tied to matters completely out of their control. Short-termism continues to pose risks to the financial security of millions of homeowners, with over two million directly exposed to interest rate changes through variable-rate mortgages. 

However, we are starting to see a change, with Labour’s Financing Growth Report exploring alternative models to increase financial resilience, including long term fixed rate mortgages. It’s about time. The UK market needs structural change to protect current and future homeowners from interest rate volatility. We can’t wait any longer.”

Joe Pepper, Chief Executive Officer at PEXA UK, said: “Borrowers expecting a quickfire set of interest rate cuts will be sorely disappointed, but it was never on the cards. There is still too much uncertainty in the economy for the Bank to move at pace. While we’ve had positive indications that inflation may falling again in January, and weakening pay growth may ease it further, the MPC are clearly still nervously looking at the December rise in CPI. 

“But markets expect rates to come down this year, and this will buoy lending. Mortgage approvals have already started to recover amid a burgeoning price war among lenders. Increasingly competitive deals will spur much-need market activity as consumers seek out better deals available.

“As pent-up demand from the last year is unlocked, the housing market will likely see spikes in activity that the conveyancing process is not yet prepared for. This highlights the need for digitalisation in our sector to remove slow manual processes, freeing up capacity and allowing consumers to fully benefit from a brightening market.”

Andrew Gething, managing director of MorganAsh, said: “The decision to hold rates is as much a response to sticky inflation, wage growth and macro-challenges, as it is a way to tell businesses and economists to hold its horses. There’s no doubt that the overall sentiment has improved massively, with a positive outlook for the second half of the year. However, the bank has to carefully balance an improving picture with a re-acceleration in spending and any potential external shocks. 

“Before any potential cut, businesses across financial services in particular must stay alive to the challenges facing their customers now in a higher interest environment. The potential for customers to find themselves in a vulnerable position is very real as research continues to show the proven link between lower income and income pressures with poor health. With Consumer Duty in force and the FCA prioritising a review of vulnerability across firms, businesses must have eyes on this situation, as well ensuring that they the necessary data and intelligence to prove to the regulator that they are delivering the right outcomes. That’s particularly true for the shocking number of firms still reporting that they have no vulnerable customers.         

“Affordability remains a key challenge for the coming year, especially with high levels of mortgage maturity still expected. The potential impact this could have on available income and both health and lifestyle pressures is significant. Six months on from coming into force, Consumer Duty and the treatment of vulnerable customers is still an absolute priority – the regulator is certainly making sure of it.”

Chris Little, Chief Revenue Officer at finova, comments: “Today’s decision to keep the base rate fixed at 5.25% is yet another indicator that the market has weathered the storm and is transitioning into a steadier phase. As lenders compete for borrowers and windows of opportunity continue to open, homeowners looking to remortgage and first-time buyers alike should feel encouraged. However, we must also acknowledge that rates are still challenging, and affordability will remain a hurdle for many aspiring borrowers as we progress into the new financial year.

“As the market levels up into a more competitive stage, borrowers will increasingly prize the value of a seamless and smooth property transaction. Financial institutions and broker firms must take full advantage of technology to streamline their service. For lenders, investing in digital tools early on will ensure they are positioned to give their clients access to the most personalised and fair rates on the market, all while managing their liabilities.”

Paresh Raja, CEO of Market Financial Solutions, said: “The Bank of England continues to walk a tightrope. Sticky inflation is making them hesitant to cut rates, but a rise in company insolvencies and the general impact of a higher cost of borrowing on the UK economy is piling on pressure to drop the base rate.

“Either way, we now know the base rate has almost certainly peaked, and it is just a matter of time before it comes back down. This shift has already started to have an impact on lenders and the property market in recent months. Mortgage, bridging and BTL rates all have started to fall, and there are the green shoots of recovery emerging after two challenging years, with early signs suggesting buyer demand and house prices are picking up. 

“The Bank might hold again – perhaps multiple times – before the cuts come, but the market is benefitting as that seemingly inevitable decision draws closer.”

Daniel Austin, CEO and co-founder at ASK Partners, said: “A hold on interest rate rises was expected now that inflation has started to fall. Although there was an effect on the affordability of debt, yesterday’s slight uptick in house prices is a positive indication that prices may have reached their lowest point. This will bring investment capital back into the real estate market from buyers who have been waiting to make opportunistic, distressed purchases. Those with finance in place are well poised to capitalise on the situation but the market in general will benefit from increased activity bringing back buyer confidence. As a lender to property developers and investors, we have seen first hand the impact that rate hikes have had on borrowers and the market; stabilisation will be welcome news.”

Savings expert and CEO of My Community Finance, Tobias Gruber, said: “While interest rates are on pause, savers should act now to lock in top savings rates. If you’ve got money saved you should use this opportunity to boost your earnings and make them work harder for you. 

“Frustratingly traditional banks were woefully slow to pass on the benefits of high interest rates last year, so don’t wait for your bank – take charge and explore options from different savings providers such as credit unions and challenger banks to find the best deal. 

“Just like shopping around for broadband or car insurance, you should be comparing savings providers to find the best deals. Experts are predicting a fall in interest rates this year so seize this opportunity before the best rates disappear.”

John Phillips, CEO of Spicerhaart and Just Mortgages said: “Even before the recent surprise news on inflation, my expectation was the Bank of England would sit on the base rate once again – even though it should cut. While there’s no doubt the bank has much to consider, the danger is it takes too long to make a decision and it eventually comes too late.

“Nevertheless, continuity and stability is a positive, especially for those not on a fixed rate deal. While it’s not here yet, a potential cut to base rate on the horizon is certainly helping bring some confidence back to the market, along with continued competition among lenders with rates coming down. We’ve seen this first hand in both our new buyer registrations and in requests for valuations, which are both at their highest point for a number of months. 

“With affordability remaining a real stumbling block for many borrowers, it would be fantastic to get to a position where the base rate is improving, lenders are continuing to innovate, and the government is bringing some much-needed support to the housing market. Given recent news and speculation, this may become a reality in the not-too-distant future. Meanwhile, our message to our brokers is to keep supporting clients, stay visible and proactive, and keep highlighting the value of advice – especially as borrowers try to navigate the market.” 

Nathan Emerson, Propertymark CEO, comments: “It is positive to see that many people intending to buy their first home or sell their current one won’t be hindered by an increase in interest rates.  

“However, it is now time for the UK Government to continue to curb inflation so that interest rates can fall further to help ease the backlash this has had on people’s affordability. They should make 2024 the year consumers start to enjoy some confidence again following three years of disruption to the economy.”  

Mortgage broker, Jonathan Bone, Mortgage Lead at Better.co.uk, said: “Despite the unexpected increase in inflation towards the end of last year, the Bank of England decision-makers have held their nerve and maintained the base rate. This provides a modest silver lining for homeowners, as it encourages lenders to keep their rates stable. 

“Forecasts from experts suggest a potential decline in the base rate by July and even more so by the end of 2025 – positive news for those aspiring to step onto the property ladder.

“Nevertheless, the reality stands that homeowners reaching the end of their fixed deals will need to allocate more funds to cover the higher cost of their mortgage repayments. The average two-year fixed rate has doubled compared to two years ago and experts anticipate that rates may not dip below 3.5% for several years.

“I strongly recommend speaking to a mortgage broker as soon as possible so they can look at your options, including variable rate and tracker mortgages. A broker will help you secure the right deal for you, even if mortgage rates fall during your application.”  

Robert Winfield, Managing Director at Chartwell Funding Limited said: “Everyone was expecting a hold this month as the BofE continues its cautious approach to finally recover us from the shenanigans of late 2022.All the signs were suggesting a surprise reduction, but SWAP rate movements over the last week or so have scuppered that dream. 

“I expect to hear the classic quotes of “slow and steady wins the race” and “it’s a marathon and not a sprint” being bandied about as the grumbles echo around the MPC announcement. Being a bit more of a “he who dares” and “fortune favours the brave” man, I would have made a reduction in February to give welcome relief to many after a very long January. 

“So when will the too high base rate worm finally turn? The experts say April or May, but I shall continue to pray to the god of optimism and ask for the next meeting.”

Foxtons CEO, Guy Gittins, commented: “A freeze on interest rates since September of last year resulted in 2023 finishing with a far higher degree of mortgage market positivity than many had forecast and it’s now clear that this positivity has carried over into 2024. We’ve already seen a promising start to the year compared to January last year, as buyers have returned to the market.

“However, the potential now is that mortgage rates could start to climb following a fourth consecutive decision to keep the base rate frozen at 5.25% and we’ve already seen evidence of lenders increasing swap rates in recent weeks in anticipation of today’s news. 

“This will further add to the air of urgency shown by buyers of late, who have been encouraged by sub 4% mortgage opportunities and have been keen to secure them while they are available.”

CEO of Yopa, Verona Frankish, commented: “Today’s decision won’t necessarily add to the property market positivity seen so far this year, but it certainly won’t diminish it either. 

“Whilst the cost of borrowing remains higher than the nation’s borrowers have become used to, they should be reassured that we’ve likely seen the peak where interest rates are concerned and that any future movement will be downwards. 

“This should help draw more buyers back to the market and we anticipate that the uplift in market activity seen during the closing stages of last year will continue to build throughout the year ahead.”

CEO of Open Property Group, Jason Harris-Cohen, commented: “Any amendment to the base rate takes time to filter through to the markets and longer still before we see it impact consumer confidence. We’re only now seeing the benefit that has come from the previous freeze on interest rates and so to have lowered them today would have been somewhat premature. 

“However, given this week’s reading on inflation, we hope that the next decision will be a cut. Failing to do so could plunge the economy into a period of negligible growth for the foreseeable future and it’s about time we started to stimulate a recovery. 

“We’ve already seen signs that the property market is heading in the right direction following the first decision to freeze rates at 5.25%, with mortgage approvals starting to climb consistently. But it’s about time we throw the nation’s homebuyers a bone to help kick start the market and reverse the downward house price trends of recent months.”

Director of Benham and Reeves, Marc von Grundherr, commented: “The property market has made considerable strides forward since the Bank of England first held the base rate at 5.25% and so today’s decision will only bring more certainty to buyers, helping to further cultivate the positive market landscape that has been developing.

“Yes, interest rates remain at their highest in over 15 years, however, this isn’t the cause of a diminished appetite for homeownership. Increasing rates, market uncertainty and ever changing mortgage offers are the key deterrent and buyers can now rest assured that the only way is down with regard to interest rates over the coming year.”

CEO of comparison site, Quotegoat.com, Michael Foote said: “The Bank of England has maintained the UK’s base rate at a 15-year high since August, citing it as a crucial measure to combat stubborn inflation. However, the strategy to curb spending seems ineffective, with inflation persisting and imposing an unwarranted burden on homeowners. 

“Today’s announcement dashes any hopes of relief for those approaching the end of their fixed-rate mortgage deals. In a landscape of soaring bank profits, homeowners find themselves bearing the financial brunt of the Bank of England’s approach. This predicament underscores the intricate challenge of striking a balance between economic stability and the welfare of individual borrowers.” 

CEO of financial comparison site, Finance.co.uk, Edward Newman said: “Today’s announcement will hit like a wave of frustration, particularly for the millions with fixed-rate mortgage deals ending this year, businesses and borrowers. The Bank of England’s plans to keep interest rates high as a means to control spending seem to be floored as the brunt of this strategy falls on hardworking Brits. Any hopes for a rate cut, which were whispered about at the end of last year, appear to be dwindling. 

“This uphill battle is shared by millions nationwide, prompting a pressing question: is keeping interest rates high truly the promised silver bullet? While banks are raking in record profits estimated to be nearly £1,000 for every person in the UK last year, hardworking homeowners seem to be shouldering the financial burden. It’s time for us to be demanding answers — is there not a more effective approach?” 

Founder and CEO of financial comparison site Lendingexpert.co.uk, David Beard said: “The uptick in inflation towards the close of last year has posed a challenge for the Bank of England in its continuous efforts to combat rising inflation. Andrew Bailey is likely to have reconsidered any initial plans for interest rate cuts in the first half of this year, given the latest inflation data released last month.

“The escalating overhead costs that businesses currently face have become a catalyst for a troubling cycle. The consistently elevated interest rates upheld by the Bank of England exert additional pressure on businesses, particularly those reliant on loans, forcing them to raise their prices. This, in turn, contributes to the persistence of high inflation, creating a complex and challenging scenario for the overall economy.”