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Property Talk: Interest rates on hold for first time since December 2021 — but is it temporary respite or start of the recovery?

Those looking for mortgages breathed a sigh of relied at noon on Thursday as The Bank of England voted to keep interest rates unchanged.

The Bank was widely expected to stick with the status quo of 5.25% interest rates, given the news earlier in the week that inflation has seemingly begun to fall slightly. The Consumer Price Index fell in August to an 18-month low of 6.7%, marginally down from 6.8% in July, and significantly below the 7% expected by many analysts.

Despite that positive sign, the vote was incredibly tight: the Bank of England’s Monetary Policy Committee voted 5-4 in favour of keeping rates at 5.25%, ending a run of monthly interest rate rises which stretches back to December 2021.

Andrew Bailey, Governor of the Bank of England, cautioned that the respite might only be temporary, especially given that inflation is still far above the 2% target.

‘There’s no room for complacency,’ he said in a statement. ‘We need to be sure inflation returns to normal and we will continue to take the decisions necessary to do just that.’

‘Still a way to go before house prices bottom out’

Commentators from across the property industry welcomed the freeze in interest rates.

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‘It’s positive to see that the bank rate has remained unchanged this time around and will be reassuring for those looking to enter the housing market especially,’ said Nathan Emerson, CEO of Propertymark.

‘Rises to interest rates have been impactful and that the fall in house prices has helped to even the affordability playing field and keep the wheels of the housing market turning.’

Lucian Cook of Savills wasn’t quite so convinced, however, saying that while this announcement is ‘an important signal’, rates will need to not just freeze but fall to make any real difference.

‘A material improvement in mortgage affordability requires the prospect a cut in interest rates coming onto the horizon,’ he said. ‘That still looks some way off, suggesting buyers’ budgets are going to remain constrained and that there is a little way to go before house prices bottom out.’

Many commentators are already hoping for more to come.

‘If the BoE continues to see a notable drop in inflation like we witnessed in August, then I believe it will be an incentive for them to start lowering the base rate in the run-up to Christmas,’ said David Hannah, Group Chairman of Cornerstone Tax.

‘There will still be a real worry for those coming to the end of a fixed rate term’

Marc von Grundherr of Benham and Reeves called it, ‘a small victory for the nation’s homebuyers who have seen the financial goal posts move constantly in recent months.’

Yet Mr von Grundherr also sounded a warning: ‘Despite rates remaining unchanged there will still be a real worry for those coming to the end of a fixed rate term, having previously locked in at a relatively affordable rate when they first purchased. When their mortgage term does expire, they are likely to find that the cost of their monthly repayments has risen considerably and this is really the last thing anyone wants to contend with, not only with the current cost of living, but with Christmas just around the corner.’

Others echoed that note of caution.

‘Yet another base rate increase may have been viewed as overkill,’ said Jason Ferrando, CEO of eastMoney, ‘but it’s fair to say that the job is far from done and so many will argue that a freeze perhaps wasn’t the right path to take today.

‘We’re yet to see prices actually fall and it’s simply the speed of increase that has reduced. So it would be a shame for the Bank of England to fall asleep at the wheel now, just as they were starting to make some progress.’

As for what happens next? Even the Bank of England themselves will probably sit back and see what happens, according to Nicholas Hyett of Wealth Club.

‘There’s a strong argument for the Bank taking a prolonged pause,’ he said. ‘Fixed rate mortgages and a higher proportion of mortgage free owner occupiers mean higher rates don’t feed through to the economy as quickly as they once did, and the full impact of past interest rate hikes hasn’t been felt yet. Expect the Bank to spend some time sitting back behind the ball and watching what unfolds.’


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