The Bank of England has announced that it will keep the UK’s base interest rate at 3.75%.
The decision comes amid wider economic uncertainty and an emerging energy crisis linked to the escalating conflict between the US and Iran.
Consumer price index (CPI) inflation currently stands at 3.0%, remaining above the Bank’s 2.0% target.
In a statement, the Bank said the move reflects continued caution by policymakers, maintaining stability while closely monitoring inflationary pressures and global economic developments in the coming months.
Richard Merrett, Managing Director of Alexander Hall, said: “Recent developments in the Middle East have already been reflected within the mortgage market, with swap rates edging up and some lenders reducing product availability as they respond to short-term market movements.
“Against that backdrop, today’s decision to hold the base rate should provide reassurance for borrowers that the broader outlook remains one of stability. While the market has adjusted in response to recent movements, the medium-term picture for borrowing costs is still far more predictable than it was a year ago.
“It’s also important to keep these changes in context. Although swap rates have increased in response to the latest global developments, they remain lower than they were this time last year.
“So while there has been some upward movement in recent weeks, the mortgage landscape is still operating from a more stable and favourable position than borrowers were facing twelve months ago.”
CEO of Foxtons, Guy Gittins, added: “Today’s decision from the Bank of England was largely expected given the market movements we’ve seen in recent weeks following developments in the Middle East.
“So far this year, we’ve seen steady growth in both house prices and supply. We expect this to continue against the backdrop of a more stable and favourable position for borrowers when compared to twelve months ago, despite recent market adjustments.”
Jonathan Samuels, CEO of specialist lender, Octane Capital, said: “Today’s decision to hold the base rate reflects a more cautious stance from the Bank of England but one that is to be expected given recent developments in the Middle East, which have already filtered through into swap rates and lender pricing.
“However, while swap rates have climbed in the short term in response to these events, they remain notably lower than they were this time last year, and by a wider margin than the increase seen since the start of the Iran conflict.
“As a result, the underlying outlook remains far more stable than it was a year ago, and holding the base rate should help lenders maintain confidence in their pricing, ensuring borrowers continue to benefit from a competitive and accessible mortgage market.”
Damien Jefferies, Founder of Jefferies London, added: “Today’s decision to hold the base rate will be viewed as a measured response to recent global developments, which have influenced sentiment across financial markets quite considerably in recent weeks.
“For international and high-net-worth buyers, consistency in monetary policy is key, so today’s decision to hold the base rate will provide some stability in this respect.
“London remains a highly attractive destination for global property investment, and in times of wider global change, we often see an increased appetite from overseas buyers looking to secure assets within established, transparent markets such as the UK.”
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