Bank of England holds interest rate – industry reacts

The vote to hold the base rate was not unanimous among the Monetary Policy Committee

Bank of England holds interest rate – industry reacts

The Bank of England chose to hold the base rate at 5.25% for the second consecutive meeting, on November 2.

So, what are the industry’s views on the decision? Mortgage Introducer reached out to a number of experts to find out.

What are the housing industry’s views on the latest decision from the Bank of England?

Andrew Gething (pictured left), managing director of MorganAsh, said after so many successive rises, news that the base rate will remain unchanged for a second straight meeting is certainly positive.

“This continuity will be most welcome among the proportion of borrowers who are on tracker or variable rate mortgages, providing some much needed certainty for what will be one of their largest monthly outgoings,” he said.

While no increase is good news, Gething said the expectation is that rates will stay at an elevated level for a lot longer as sticky inflation remains a clear obstacle. Alongside challenges in the wider economy, particularly around wage growth, he said, the Bank of England will also have one eye on a jump in mortgage arrears.

“Even with the consensus that inflation will continue to trend downwards, future rises are certainly not off the cards,” Gething said.

With sustained pressure on household budgets, Gething said firms across financial services must stay close to clients to identify their potential stresses and vulnerabilities.

Nick Leeming (pictured centre), chairman of Jackson-Stops, agreed with Gething, and said the market will take some clarity and comfort from the Bank of England’s decision to hold the base rate at 5.25%.

“While international events have added to already challenging conditions and the curtain has firmly fallen on the era of cheap borrowing, monetary policy will not be determined in the long-term by short-term pressures, and quite rightly so,” he said.

For the property market, Leeming said holding rates steady provides certainty for buyers who remain committed to their property search. The reality, he added, is that while some buyers who wanted to move but did not need to will take a step back, house-hunters who need to move are still showing a commitment to go ahead with planned purchases.

Leeming believes persistent demand is why we saw UK house prices rise in October, underpinned by a dearth of supply on the commuter belt and UK coastline.

“This is the final time the Monetary Policy Committee will meet before the Chancellor’s Autumn Statement, when we hope to hear more about the government’s plans for the housing market including possible policy changes and tax cuts,” he added.

Split decision on base rate future

Tom Hopkins (pictured right), senior portfolio manager at BRI Wealth Management, highlighted the vote to hold the base rate was not unanimous. While the majority, six, voted to keep rates unchanged, three Monetary Policy Committee members voted for another rate hike. 

The decision, Hopkins said, follows suit with other major central banks that have already held borrowing costs in recent days. 

“The problem which the Bank of England will be keeping a close eye on is that inflation in the UK is still running higher than other advanced economies,” he said.

Hopkins added that markets have generally taken this pause from both the European Central Bank (ECB), Federal Reserve (FED) and now the Bank of England positively, as the consensus is that the peak of rates has been reached. It should mean that monetary tightening is having an impact on the economy, even if this is not yet readily apparent from the latest data.

“In addition, the ‘higher for longer’ narrative could lose momentum over the next few months if the economic data deteriorates,” Hopkins said.

What are your views on the Bank of England’s Monetary Policy Committee holding the base rate for the second consecutive time? Let us know in the comment section below.