The widely expected move saw a majority of five members vote to keep the base rate as it is, with four voting to lower it by 25 basis points to 3.5%.
The committee’s minutes noted that it expected Consumer Prices Index (CPI) inflation to “fall back to around the 2% target from April”. The hold comes after the news that inflation saw a rise in December, going up to 3.4% from the 3.2% measured in the prior month. The committee members emphasised the importance of inflation “remaining sustainably at the 2% target in the medium term”.
Market ‘in a healthier position than 12 months ago’
Despite narrowly voting in favour of a hold at this month’s meeting, the MPC’s minutes outlined a more positive outlook for the year. It stated that it expected further cuts to the base rate, although its members remain split regarding the extent and timing of these reductions. Recent gross domestic product (GDP) data supported this optimism, with the Office for National Statistics (ONS) finding that the UK economy expanded in November.
Alpa Bhakta, CEO of Butterfield Mortgages, said: “Today’s decision is entirely in keeping with the Bank of England’s cautious approach over the last two years as it balances economic resilience against persistent inflationary pressures. For the Prime Central London (PCL) market, holding the base rate will do little to inspire higher levels of activity. However, we should not overlook the fact that the market is in a healthier position than 12 months ago and the potential for future rate cuts remains.”
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Darrell Walker, group sales director at Chetwood Bank for ModaMortgages and CHL Mortgages, added: “The MPC has taken a steady and cautious approach to reducing the base rate so far, and the mixed economic picture heading into today’s decision meant lenders had already priced a hold into their rates. As a result, we’re not expecting to see much of an immediate impact – either positive or negative – in response to the decision.
“That is not a problem. Stability will allow the market to build on some of the modest momentum that we’ve seen in recent weeks. While a cut will likely have accelerated some decision-making, it feels as though seasonal trends are having the greatest influence on activity at the moment. Although transactions and deals may not be completing at pace right now, asking price data suggests the market could be poised for meaningful growth once the monetary environment is relaxed.”
He continued: “We’re expecting the Bank of England to signal that it will move in this direction in the coming months. But, in the meantime, we will continue to prioritise flexibility and certainty to ensure brokers and their clients have the products and support they need to get deals over the line.”
