The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 6:3 to hold the base rate at its current level, with three members voting to increase it to 4%.
The minutes of the meeting echoed the sentiments from the previous meeting that the conflict in Iran and surrounding regions, coupled with the potential impact of the “energy shock” on the UK economy, meant it was taking a more cautious approach. It also reinforced its aim to achieve the 2% inflation target “sustainably”.
Decision is ‘a continued common-sense approach’
Steve Cox, chief commercial officer at Fleet Mortgages, commented: “The Bank of England’s decision to hold bank base rate at 3.75% feels like a continued common-sense approach given the current backdrop. While inflation remains a concern, and the renewed conflict in the Middle East and future energy price hikes are likely to push it higher in the months ahead, there are still enough questions surrounding wider economic growth levels to justify keeping rates where they are for now.
“The decision will certainly be welcomed by the new Prime Minister and Chancellor, who have set an early stall out to ease the cost of living rather than adding to it, and will not have wanted to see monthly mortgage bills rising for some so soon.
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“From a buy-to-let perspective, today’s decision should not be viewed in isolation because the mortgage market has already been responding to changing economic conditions over recent weeks. Higher swap rates and funding costs have prompted a number of lenders to increase pricing, meaning mortgage rates have effectively been moving ahead of the MPC.
“For landlords, particularly those approaching a remortgage or considering their next purchase, waiting for greater certainty may not prove to be the right strategy. The next MPC meeting is not until September, a great deal can happen between now and then, and the direction of mortgage pricing will be determined just as much by funding markets and geopolitical developments as it will by bank base rate itself. I would suggest that advisers make clear to clients that the time to act is probably now rather than adopting a wait-and-see attitude.”
