Earlier today, the Bank of England’s Monetary Policy Committee (MPC) voted to hold the base rate at 4%. This comes after another hold in September and a cut to 4% from 4.25% in August.
Rob Clifford, CEO of Stonebridge, said the decision to hold the base rate suggested that the central bank was “not taking the recent good news on inflation for granted”.
He continued: “While inflation held steady in August, it’s clear that the MPC’s mindset is to proceed with caution. However, we believe there is a strong chance that the MPC will deliver borrowers an early Christmas present by cutting rates at next month’s meeting, especially if economic growth continues to disappoint.
“That would likely intensify the recent price war being waged among lenders, leading to further reductions in mortgage rates and further boosting consumer confidence.
“For advisers, now is the time to re-engage with customers approaching the end of their deals. Falling rates can create consumer confusion, just as much as rising rates, so acting early gives them the best chance of securing the deal that suits their circumstances.”
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Mark Harris, chief executive of SPF Private Clients, said there was a “slim chance” that the Bank of England would cut interest rates this month, but “ongoing concerns over inflation” and a “bit of wait-and-see as to what impact the Budget has, meant caution prevailed”.
“We are encouraged by four members voting for a reduction in base rate to 3.75% and hope more of the committee come round to their way of thinking in due course, perhaps even as soon as next month. Market expectations are for another rate cut before the end of the year, with the ‘big six’ lenders active in reducing rates in recent days in an effort to drum up business before the year-end.
“A rate cut today would have been a welcome shot in the arm for the housing market amid much speculation as to what property taxes – and more – will be included in the Budget in three weeks. Despite five rate reductions since August last year, affordability concerns persist, with borrowers having to get used to higher mortgage rates. Further rate reductions are necessary to boost not only the housing market but the wider economy,” he noted.
Buyers urged not to delay
Ben Thompson, deputy CEO, Mortgage Advice Bureau, said it was “no surprise” that the Bank of England “acted with caution”.
“This decision breaks the streak of quarterly rate cuts, and with the Autumn Budget fast approaching and meaningful tax rises likely to be imminent, the bank is clearly waiting for certainty on the inflationary outlook before making any further moves. Homebuyers and movers should therefore anticipate a stable rate environment for the time being,” he noted.
Thompson continued that the “reality on the ground is much more encouraging”, as three years of economic adjustment have “delivered a much brighter picture”.
“House price growth has flattened, wage growth in real terms is on the rise, and borrowing power is significantly better than it was 12 to 24 months ago. With lenders offering a wealth of innovative products, there are countless opportunities for prospective buyers to secure a competitive deal.
“Whatever your homebuying plans, the message is simple: don’t delay. Playing the waiting game for one or two marginal base rate cuts is a gamble. If the economic confidence that the bank is waiting for truly takes hold, a surge in demand could see house prices accelerate quickly. This essentially means that any small savings made on a lower mortgage rate would be eaten up by a higher property price. If you’re thinking of buying or moving, now is the time to act before market momentum returns fully.
“As always, the importance of speaking to a mortgage broker cannot be understated, as they can provide bespoke guidance based on your financial circumstances, and help you navigate the current market to secure the right deal,” he said.
Matt Smith, Rightmove’s mortgages expert, said there was “still a good chance of a rate cut before the end of the year, depending on what is announced in a couple of weeks’ time, and if not then we’re looking at early 2026”.
“Some good news is that the cost of financing mortgages has actually come down in recent weeks. We’ve started to see some lenders become more competitive in certain segments of the mortgage market in recent days, and offer some headline-grabbing cheaper rates, as they look to secure some final business before the end of the year,” he noted.
Smith said that the average two-year fixed mortgage rate is now 4.44% – down from 4.95% at this time last year.
“The downward trend is good, but mortgage rates have come down more slowly than many were predicting at this time last year. Rates have come down even more slowly for five-year products.
“With the uncertainty surrounding how the upcoming Budget will impact people’s finances, another rate cut soon followed by some notable reductions in mass-market mortgage rate products would be a big boost to homemover sentiment and affordability.”
