Bank of England decision reaction – what does the latest hold mean for the mortgage industry?

Experts discuss the implications of last week’s rate freeze

Bank of England decision reaction – what does the latest hold mean for the mortgage industry?

The Bank of England’s Monetary Policy Committee chose to hold the base rate at 5.25% on December 14, marking the third consecutive time interest rates have remain unchanged following a BoE gathering.

So, what are the industry’s views on the central bank’s latest decision?

What does another held base rate mean for mortgages?

Karen Noye (pictured left), mortgage expert at Quilter, said the Bank of England’s (BoE) decision to maintain the interest rate at 5.25% is a significant move with multifaceted implications for the UK economy, but by and large it should spell good news for mortgages and the housing market.

“For the housing market, this pause in interest rate hikes may boost confidence; more certainty over mortgage costs breeds higher buyer confidence and property market activity,” she said.

Noye added that more potential buyers should start to feel confident about entering the market, potentially sustaining or even boosting housing prices.

Recent house price indices have shown, she said, that as a result of limited housing, stock prices have modestly increased.

However, Noye said the broader economic context remains challenging, and the ongoing cost-of-living squeeze, with rising energy costs and still relatively high mortgage rates, continue to strain household budgets.

This, she added, suggests that while the interest rate hold may bring some stability, many households will still face significant financial pressures as we enter into the new year.

“For those with mortgages, the picture is mixed; borrowers on variable-rate mortgages gain a reprieve from immediate payment increases, which could encourage spending and economic activity,” she said.

Meanwhile, Noye said for those looking to remortgage or secure new mortgages, they may still face relatively high rates and stringent lending criteria. Lenders however, she said, are likely to remain competitive, which could lead to more favourable rates for borrowers over time.

“While the BoE’s decision brings some stability and potential confidence boosts to the property market, it exists within a broader context of economic challenges,” she said.

Households and borrowers, Noye said, must navigate a landscape of high living costs and complex mortgage market conditions.

“The direction of future monetary policy and its impact on various economic sectors will be critical in shaping the UK’s economic trajectory in the coming months,” Noye said.

What is the impact of holding the base rate?

Andrew Gething (pictured right), managing director of MorganAsh, said news of another hold on interest rates marks a stable end to an intense year for borrowing.

“Despite the BoE’s own view that this may be the outcome for a much longer period, markets seem buoyed by the long-term outlook for interest rates and the wider economy being far more stable,” he said.

Economists, Gething said, are even suggesting that markets are pricing in cuts next year, with forecasts for rates edging towards 4% by the end of 2024.

“We are certainly seeing this positivity in mortgages rates, which continues to improve and become more competitive,” Gething added.

This, he added, does not mean it is all plain sailing from here, with many homeowners and consumers set to feel considerable pressure in the coming year. That is especially true, Gething said, for the more than a million homeowners set to remortgage in 2024 on to a much higher rate than they are used to.

What is your view on holding the base rate for the third consecutive time? Let us know in the comment section below.