The Bank of England has announced its interest rate decision.
The rate remains at 4.25%.
It was cut to that rate last month when the Bank’s Monetary Policy Committee (MPC) hinted at further reductions in the near future.
But analysts now suggest those cuts will not arrive until later in the year, as inflation remains significantly above target.
Mark Harris, chief executive of mortgage broker SPF Private Clients, says: “The Bank of England has held rates at 4.25 per cent, which comes as no real surprise with CPI inflation at 3.4 per cent in the year to May, down only slightly from 3.5 per cent in April. With only a two-way split in voting this time around (three members voted for a quarter-point reduction while six voted for a hold), this is encouraging, suggesting that another reduction could come at the August meeting.
“However, with the Bank opting for a cautious approach, it has missed a real opportunity to be bold by cutting rates again. This would have sent out a strong message, helping boost the housing market and wider economy, particularly now that the stamp duty concession is no longer available.
“There is some good news for borrowers though in that lenders have reduced mortgage rates and eased criteria in recent weeks. This rate hold was largely expected by the markets but if Swap rates fall, this will enable lenders to price their fixed-rate mortgages more keenly, easing borrowers’ affordability concerns.
“Those looking to take out a new mortgage or refinance in coming months should plan ahead as much as possible, seeking advice from a whole-of-market broker. We expect the MPC to continue on the anticipated path for base rate with further reductions in coming months but what can’t be guaranteed is where rates end up, nor the pace it takes to get there.”
And Tomer Aboody, director of specialist lender MT Finance, comments: “Everyone knows that stamp duty is the biggest obstacle for the housing market. Whenever there is an increase in stamp duty rates, market activity slows and sometimes stagnates. On the other hand, with a downwards shift in stamp duty comes a big influx of buyers and sellers.
“With the newly-adjusted higher stamp duty rates, we are seeing a relatively stagnant housing market as buyers await another interest rate reduction to help cancel out the higher stamp duty with lower mortgage payments.
“With the current economy not at its strongest, the Bank of England has a dilemma on its hands – does it reduce rates further now, since another reduction can increase inflation?
“With the housing market being one of, if not the most crucial, economy drivers in the UK, any base rate reduction will increase market activity, which in turn increases consumer confidence. Another rate cut is surely on the cards for 2025, even though the Bank wasn’t quite ready to make it this time around.”
Kevin Roberts, Managing Director of L&G’s Mortgage Services business, adds: “I don’t think too many people will be surprised at the base rate holding at 4.25%, but there’s still plenty of positives in the market. We’re seeing more sub-4% deals on offer, along with some innovative products, with higher LTVs and low, or no deposits. As we move into the peak summer season, now’s a good time to consult with a professional mortgage adviser to make the most of what the current market has to offer.”
