21 September 2023
If you are covering the decision by the Bank of England to hold interest rates and how it will impact mortgages, please see the following comment from Karen Noye, mortgage expert at Quilter:
"The recent announcement by the Bank of England (BoE) to maintain the interest rate at 5.25% will play an important role in the future of the mortgage and housing market. This decision, which comes on the heels of a surprising dip in inflation, will undoubtedly have significant implications for the mortgage market in particular.
"Firstly, the decision to hold rates steady suggests that the BoE is attempting to strike a balance between supporting economic growth and containing inflationary pressures. Historically, a decrease in inflation might have prompted the bank to lower interest rates to further stimulate economic activity but with inflation still running far above the 2% target it’s likely that they will keep interest rates elevated for some time yet.
"For current and prospective homeowners, this decision to hold interest rates where they are offers a mixed bag. On the one hand, those on variable rate mortgages will not see an immediate increase in their monthly payments. The stability in interest rates provides a reprieve for borrowers, especially for those who might have been concerned about rising costs in an environment of increasing rates. This could lead to increased consumer confidence and spending as homeowners feel more secure in their financial positions. People may feel more inclined to return to the property market boosting sales and in turn keeping prices buoyant.
"On the other hand, for those looking to remortgage or take out a new mortgage, lenders will remain stringent in their criteria and rates still are so different to what we have been used to over the past few years. Although fixed rates have reduced a little we might not see significant reductions offered to new borrowers or those looking to switch but there is no doubt that things are moving in the right direction. It is also worth remembering that lenders are still commercial entities and they will need to compete for custom so price wars might be expected helping to push rates further down especially now the tide is turning.
"It's also worth noting that the housing market often reacts sensitively to perceptions and predictions about future monetary policy. The BoE's decision might be interpreted by some as a sign of economic stability, leading to increased confidence in the housing market. The next steps will really serve as a bellwether for the future of the UK housing market.
"While the immediate impact of the BoE's decision on the mortgage market is a stabilising one, its long-term effects are more ambiguous. Borrowers on variable rate mortgages can breathe a sigh of relief, at least for now, but those looking for new mortgage deals may need to navigate a more complex landscape. As always, the interplay of various economic factors will determine the trajectory of the mortgage market in the coming months."
