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Experts predict an end to Bank of England base rate hikes

by: Matthew Browning
  • 22/09/2023
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Experts predict an end to Bank of England base rate hikes
Yesterday saw the Bank of England pause base rate hikes for the first time since December 2021 and a range of experts believe this marks the end of the fourteen-month hike streak. But many warn homeowners the wait for a much lower rate will be a long one.

Homeowners were given a long-awaited reprieve on mortgage rates and the consensus among financial experts is that the rate will stay at least stay at 5.25 per cent rather than surging any further.

Experts including Paul Dales from Capital Economics think there may finally be some stability with future base rates.

He said: “The surprise decision by the Bank of England to leave interest rates unchanged at 5.25 per cent probably means that rates are already at their peak.

“We think rates will stay at this peak of 5.25 per cent for longer than the Fed and the ECB, but that when rates are cut in late 2024 they will then be reduced further and faster than widely expected.”

Richard Campo, founder of mortgage advisors Rose Capital Partners also believes the peak may have been reached, which he thinks is good news for future buyers.

He said: “The seemingly endless rate rises from the BoE were causing borrowers to procrastinate on committing to their new remortgage deals and putting off some would-be homebuyers completely.

“This could even bolster house prices as we have seen huge pent-up demand in recent months from people holding buying off until mortgage costs stabilise.”


Rates to remain high despite pause on price surge

Despite the upturn in optimism for homeowners, the chief economist for Santander, Frances Haque believes any enthusiasm ought to be tempered, believing “the question now is firmly centred on whether this pause will remain or if another rate rise will be needed in November.”

“Only time and further economic data will tell,” she added.

The vote to approve the 5.25 per cent rate was a tight one, with five of the committee opting to stick with the same rate and four preferring a 0.25 per cent increase.

Danni Hewson, head of financial analysis at AJ Bell, summarised the marginal decision and its impact on households. Like many of her peers, the analyst anticipates the rates will take some time to drop.

She said: “For millions of homeowners who’ve already seen their mortgage payments increase or the half a million facing a hike in the run-up to Christmas, today’s decision will be cold comfort.

“Costs have skyrocketed as ultra-low rates were left in the rear-view mirror and though competition is gradually returning to the mortgage market and the number of products available has increased, those coming off fixed rates are facing a big cost of mortgage shock.”

She concluded: “Markets think the peak has been reached with over 70 per cent anticipating another hold at the next meeting in November. But anyone hoping that the base rate will make a swift return from whence it came is going to be sorely disappointed, as rates are expected to remain high for some time to come.”

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