With pressures of a ceasefire in the Middle East not yet placating the inflationary pressures on energy prices, many are wary of the temporary nature of stability.
Frances McDonald, director of Savills Residential Research, commented: “Today’s decisive (7:2) bank base rate hold was largely expected by markets, particularly as May inflation figures remained steady, though inflation is expected to rise later this year as the effects of higher energy prices feed through.”
Caution about impact of external factors
The decision was not short of positive reactions, but many were keen to err on the side of caution.
Tony Hall, head of business development at Saffron for Intermediaries, commented: “With inflation still above the 2% target, policymakers have opted on the side of caution.
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“Although speculation of a rate increase had grown in recent weeks, today’s decision shows there are still grounds for cautious optimism.”
John Fraser-Tucker, head of mortgages at Mojo Mortgages, said: “The decision to hold reflects the bank’s caution around lingering external economic factors, such as unpredictable global energy markets, which policymakers expect could nudge inflation back up toward 3.25% by the end of the year.”
Melanie Spencer, growth director at Target Group, said: “While many would have hoped for a clearer path to rate cuts this year, the reality of the situation we’re in means I think many are just glad we’re not facing one or even multiple rate hikes.
“The mood music around that has seemed to change, as reflected in swap rates and mortgage pricing more broadly. It’s safe to say though we’re not out of the woods just yet.”
Agility and resilience required of lenders
Spencer added: “For lenders and building societies, there is a clear need to remain operationally agile in such a volatile market and economy.
“Borrower behaviour is changing, product demand is shifting and competition for both mortgage and savings balances remains intense.”
Scott Clay, director at specialist property lender Together, said: “We’ve also seen swap rates dip in the past couple of weeks, and lenders’ pricing is expected to follow suit, providing greater affordability for homebuyers and movers and leading to increased movement in the housing market.
“This could provide some impetus for mortgage borrowers to move ahead with their property plans ahead of any possible future price rises.”
Hollingworth added: “Brokers should still proactively reach out to clients approaching the end of their fixed deal. Today’s decision and yesterday’s inflation reading suggests that mortgage rates will likely stay where they are for the time being.”
Steve Cox, chief commercial officer at Fleet Mortgages, summarised: “Advisers and landlord clients can take confidence from the fact product pricing has been moving in the right direction despite ongoing uncertainty around monetary policy.”
