Interest rates held at 5.25% for fifth consecutive time: Bank of England

Posted on Thursday, March 21, 2024

The Bank of England's Monetary Policy Committee voted 8-1 in favour of maintaining the base rate at 5.25%.

The bank has chosen to hold interest rates at 5.25% since August 2023. However, today's decision, along with yesterday's news that inflation had fallen below economists' forecasts to 3.4%, has been welcomed by industry experts as a sign that "we are edging closer to a rate cut".

However, despite this the bank remained slightly cautious and stated that "key indicators of inflation persistence remain elevated".

Tom Bill, head of UK residential research at Knight Frank, said: “The question now for buyers, sellers and anyone re-mortgaging is whether a rate cut is more likely in May or June. The economic signals are mixed but the fact nobody voted to raise rates this month increases the chances of a spring cut. Overall, while mortgages starting with a 3 have dried up since January, more should appear as this year as inflation is tamed.”

Nathan Emerson, CEO of Propertymark, comments: “The Bank of England issued an optimistic projection last month that inflation could fall back down to pre-Covid-19 levels by this summer. There are signs that interest rates are not deterring people from buying their first home.

"Propertymark’s own Housing Insight Report found that there has been a 120 per cent increase in the number of potential buyers registered so now that optimism and momentum is gaining in the market, we now need to see interest rates start to fall so that buyers’ affordability can further increase, opening up the market and providing more options for those looking to move home.”

Rob Clifford, Chief Executive of mortgage and protection network, Stonebridge, said: "Even with the announcement of yesterday's fall in inflation, a Base Rate cut always felt like a bridge too far for the MPC at this month's meeting; although with the OBR forecasting inflation will hit the 2% target in the next couple of months, it feels like we are not a million miles away from that first highly-anticipated BBR cut.

"In the meantime, the likelihood is that mortgage product rates are not going to move much in the coming weeks, and we must also recognise that, even with a cut, there won't be a huge shift downward in pricing. For advisers, it is, therefore, all about making their customers aware of this and continuing to provide solutions based on the market as it is today, not what it was in the past or what it might be months down the line."

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: "The Bank’s decision to hold rates is not surprising but the pressure is building for a cut sooner rather than later.

"The inflation figure always helps set the trajectory for rates and its present level, with the prospect of further drops, will probably force the Bank’s hand at some point.

"Further falls in the pace of wage growth in particular will contribute to the decision making but we have already noticed mortgage payments at least are beginning to fall again as they are not bound by the same constraints and are certainly helping to build confidence in the housing market to take on debt.”

Matthew Kimber, CEO of Molo says: “With UK inflation hitting a two-and-a-half-year low at 3.4% in February, the Bank of England’s decision to keep interest rates at 5.25% reflects a cautious stance amid ongoing economic uncertainties. While stability in lending conditions offers borrowers confidence in mortgage rates, it also reflects the Bank’s vigilance towards economic recovery and inflation control.

For borrowers, the unchanged interest rates mean stable mortgage conditions, ensuring financial security but potentially missing out on cost reductions. It supports financial planning but necessitates monitoring future economic trends for potential affordability impacts.”

Via @PropertyReporter