Samuel Fuller, director at Financial Markets Online, commented that the Monetary Policy Committee (MPC) has moved from a “watch and wait” to a “watch and wait with a big stick” stance.
Rate outlook under scrutiny
Alice Haine, head of personal finance at Hargreaves Lansdown, said the hold would offer little immediate relief for borrowers already locked into fixed rate deals, but warned that first-time buyers and those coming up for remortgage could be increasingly concerned about the prospect of future rate rises.
She added: “Anyone looking to sign up for a new mortgage or refinance an existing deal would be wise to lock in a new product quickly rather than wait for borrowing conditions to improve further.”
Similar warnings came from Adam French, head of consumer finance at Moneyfactscompare.co.uk, who said borrowers should not expect mortgage rates to fall significantly in the near term.
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He noted: “Unless the economic backdrop improves significantly, borrowers should not expect mortgage rates to fall much anytime soon. Anyone planning to take out a mortgage within the next six months should consider securing a deal sooner rather than later.”
Emma Hollingworth, chief distribution officer at LSL Financial Services, also pointed to geopolitical risks, warning that prolonged tensions in the Middle East could yet trigger further action from policymakers.
She said: “If the conflict drags on and inflation starts to rise, the MPC may have no choice but to increase borrowing costs.”
Mortgage pricing uncouples from bank rate
French said mortgage costs had already been rising ahead of the bank’s decision, with the Moneyfacts Average New Mortgage Rate increasing by 0.16 percentage points over the past fortnight, from 5.43% to 5.59%.
Major lenders continued this week to increase rates across a breadth of products.
Richard Pike, sales and marketing director at Phoebus Software, warned borrowers not to assume a base rate hold would translate into stable mortgage pricing.
“Fixed rate pricing is driven as much by swap rates and lenders’ funding costs as it is by bank rate itself,” he said, noting that swap rates have been volatile since the start of the US-Iran conflict and that a number of lenders have repriced upwards in recent weeks,” he noted.
Ryan McGrath, director of second charge mortgages at Pepper Money, said the hold would offer borrowers “a breather”, but would do little to ease the financial pressures that have built up in recent years.
He added that broker recommendations were increasingly reflecting uncertainty over the rate outlook, with more borrowers opting for two-year fixes over longer-term deals.
“Nobody wants to lock in for half a decade when there’s a reasonable chance rates move meaningfully in either direction before the term is up,” McGrath added.
Colleen Babcock, property expert at Rightmove, said that while mortgage rates remain elevated, their relative stability is helping borrowers plan with greater confidence.
“While rates are high, they’re also relatively steady, which helps movers to plan and make decisions,” she said.
Looking beyond the next rate decision
Martin Sims, distribution director at Molo, said the market has largely moved on from hopes that borrowing costs will fall significantly in the near term.
He cautioned against making investment decisions based on expectations of future rate cuts.
He noted: “There’s a danger in becoming too focused on the next MPC meeting. If a property only works because you’re banking on lower borrowing costs in a few months’ time, it’s probably worth asking whether it’s the right investment in the first place.”
Rather than sitting on the sidelines, professional landlords are continuing to review portfolios and seek opportunities, he added.
“The professional landlords we’re working with aren’t standing still. They’re reviewing portfolios, refinancing where it strengthens cash flow, and continuing to invest where the fundamentals remain strong,” he said.
Ben Thompson, director of home moving strategy at Mortgage Advice Bureau (MAB), said a steady base rate should provide some reassurance for borrowers, but stressed that advice remains key.
Thompson continued: “If you’re a first-time buyer, a steady rate means lender pricing isn’t likely to jump around much in the short term. But deposit requirements and criteria still vary hugely from lender to lender, so finding the right match matters just as much as the rate itself.
“For remortgagors, don’t mistake ‘no change’ for ‘nothing to do’. Lenders price their fixed deals around swap rates, so if your deal ends in the next six months, now is the time to start looking at your options.
“If you’re moving home, this gives you a steadier backdrop to plan against, but affordability still comes down to your own circumstances, so there’s no reason to put those plans on ice.”
