Following a reduction in November, the Bank of England has held interest rates at 4.75% on Thursday.
The hold comes as a result of inflation increasing for a second consecutive month to 2.6% (November 2024), which remains higher than the Bank of England target rate of 2.0%.
Stephanie Daley, Director of Partnerships at mortgage advisor Alexander Hall, said, “The Bank of England’s decision to hold interest rates at 4.75% comes as no surprise, given the current economic climate.
“With UK inflation rising to 2.6% in November – the second consecutive monthly increase – and core inflation climbing to 3.5%, there’s clear upward pressure on prices.
“For borrowers and homeowners, stability in the base rate this month goes hand in hand with the expectation of a very slow downward movement in the base rate.
“Forecasts still expect future base rate drops next year but in the short term the sustained inflation trend will likely keep lenders vigilant and mortgage pricing reflective of longer-term uncertainties.
“It is essential for both home movers and remortgage clients to seek advice in order to navigate these challenges and find solutions that best suit their financial situations in what still remains a very changeable market.”
CEO of specialist lender Octane Capital, Jonathan Samuels, said, “Whilst it’s been a largely positive year for the property market, we simply haven’t seen the base rate reductions that many had hoped for and, as a result, higher mortgage rates have remained a challenge for many borrowers.
“We’ve seen inflation rear its head again in recent months and so a hold was always going to be on the cards today. However, the silver lining is that we remain in a far more positive place than we did even a year ago and buyers should continue to act with a greater degree of confidence when traversing the market, as they have done for much of this year.”
Director of Benham and Reeves, Marc von Grundherr, added, “Not the Christmas cracker that many homebuyers were hoping for but not quite a lump of coal either and today’s hold on the base rate will do little to impact the current trajectory of the property market, particularly given the stamp duty deadline in place.”
Robert Sadler, Vice President of Real Estate at Excellion Capital said, “When the base rate was cut back in November, there was wide expectation that it would be the first of at least two cuts before the end of the year, but at Excellion we sensed that the market response to Labour’s inflationary Autumn Budget would in fact mean that any further base rate cuts in 2024 were highly unlikely.
“With recent rises to inflation and the 5-year SONIA swap rate up more than 30 basis points in the past week alone, investors are desperately holding out for some kind of relief. Sadly, it hasn’t come today. As a result, on the residential side, we’re likely to see mortgage rates increase, and on the commercial side we’re looking at heightened investor caution driven by increased borrowing costs.
“For the government itself, this is also bad news as it means their ambitious housebuilding targets are now even further out of reach than they were before because this hold will likely mean projects cost more and move more slowly. At a time when the UK needs an environment of ambition and calculated risk taking, this base rate decision is likely to foster one of caution and constraint.”
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