Recent easing in mortgage rates is ‘likely to stall’

The latest research from the Royal Institute of Charted Surveyors has found that the recent easing in mortgage rates is “likely to stall” due to widespread uncertainty over the speed and timing of the Bank of England’s interest rate reductions – hampering the near-term outlook for the sector.

Since September, the BoE has held interest rates at 5.25% following fourteen consecutive interest rate hikes beginning in December 2021.

Exclusive data from Cornerstone Tax, the UK’s leading property tax consultancy, reveals the extent of the damage caused by the BoE’s refusal to shift on the base rate of interest – with 30% of Brits saying that they have been saving for more than a decade and still cannot get on the property ladder due to increased costs.

According to David Hannah, Group Chairman of Cornerstone Tax, the BoE’s monetary policy committee ought to look towards cutting the base rate of interest at Wednesday’s meeting in a bid to spur optimism within the UK’s property market and get Britain buying again.

Further figures from Cornerstone Tax find that 15% of buy-to-let landlords from across the UK are selling up due to the rising cots of their property, whilst 15% of first-time buyers have fallen into financial difficulty due to high interest rates and the cost associated with their home.

Following a peak in the first half of 2023, mortgage lenders from across the UK have engaged in a price-war in response to the BoE’s decision to hold the base rate of interest – with the majority of lenders believing that the consecutive increases to rates had reached their apex in September.

However, in the months since, several lenders have increased their mortgage rates due to continued signals from the BoE suggesting that rates will hold as a product of ongoing inflationary pressure, despite prolonged symptoms of economic contraction.

David Hannah, Group Chairman of Cornerstone Tax, said, “The latest figures from the RICS should provide a wake-up call to the Andrew Bailey and the Bank of England, the MPC seriously risks reversing the progress made within the mortgage market over the past few months if it doesn’t make a serious effort to reduce interest rates at their next meeting.

“As the nation struggles with a cost-of-living crisis, it’s clear that the BoE’s hawkish approach is exacerbating the challenges faced by renters, landlords and first-time buyers alike.

“Our data reveals the true extent of the damage caused by the BoE’s failure to prioritise the housing market, with 15% of first-time buyers falling into financial difficulty due to record high interest rates.”