No change in interest rates disappoints mortgage market: mortgage & property experts share reaction

With the news that the Bank of England has kept UK interest rates at 5.25% – the highest level for 16 years – the pressure is maintained on mortgage holders, those looking to re-mortgage or apply for new loans, and the property market more broadly.

Yesterday’s news that inflation had fallen to 3.4% in the year to the end of February had given the tiniest glimmer of hope that the BoE might take heed and start cutting rates, despite various statements in recent weeks where they’ve made it clear they’re looking for a sustained period where inflation is at their target level of 2%.

So what does today’s news of interest rates being held at current levels mean for mortgage and property markets – and hard pressed borrowers? The reactions that many professionals have shared with us are as follows:

In response to the Bank of England’s announcement on interest rates, 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.” 

Paresh Raja, CEO of Market Financial Solutions, said: “Yesterday’s inflation data didn’t fall enough to move the needle for the Bank of England, but the property market is already benefitting from the stability that a static base rate provides. Mortgage rates have fallen, buyer demand has risen, and we’ve seen a return to growth where house prices are concerned, all contributing to a solid start to the year for the property market.

“Clearly, buyers are adapting to the higher rate environment, and lenders are being bolder in the rates and products they are offering. This is important – even when the Bank does cut the base rate, we have to be realistic in accepting that rates will not come down as quickly as they went up, so the market has to adjust to a different interest rate environment.

“The early signs are that this is happening, and while inflationary pressures and election uncertainty remain as bumps in the road ahead, there is undoubtedly far greater confidence and optimism permeating through the property market.”

John Phillips, CEO of Spicerhaart and Just Mortgages, said: “It’s a real shame that the MPC didn’t seize the opportunity to make the first long-awaited cut to base rate. That’s especially true given yesterday’s news and the positive trajectory of inflation. While the central bank does have to exercise caution to reach its 2% target, it’s critical it doesn’t stifle the economy by making a decision too late. 

“A base rate cut today would have added some fantastic momentum to the confidence we have seen return back to the market and helped in some way to answer the affordability challenges many are still experiencing. Nonetheless, a fifth consecutive hold brings stability and along with yesterday’s inflation news, may reflect positively on swap rates – giving lenders the opportunity to reprice rates, even if only marginally. 

“Without any Government intervention in the recent budget, or any movement in the base rate, brokers must continue to get the basics right, pound the pavement and offer that five-star service to continue nurturing this confidence and help answer this growing appetite to get moving plans back on track.”

Richard Carter, head of fixed interest research at Quilter Cheviot: “As had been expected, the Bank of England has once again followed in the Federal Reserve’s footsteps with a further hold on interest rates. Eight of the Bank’s nine policymakers voted to hold, while one voted for a cut, suggesting the tide could soon begin to turn.

“Just yesterday we saw inflation drop to 3.4%, the lowest level seen since September 2021, but the journey to get there has not been plain sailing and there is still some way to go to reach the Bank’s 2% target. Wage growth continues to be a significant driver of inflation, particularly in the service sector, and though this is now slowing a little it will no doubt make this target harder to achieve. There are also signs that the UK has already pulled itself out of the recession it entered at the end of last year with a return to a modest level of growth. As such, the Bank has reiterated that it will maintain its data dependent resolve until it is satisfied that inflation has come down far enough and will not see a further spike.

“Nonetheless, yesterday’s figures will have given the Bank of England some confidence that inflation is finally coming to heel, and with the 12% cut to the energy price cap due to kick in in April it will face increasing pressure to finally begin making cuts. The Bank has a difficult balancing act ahead of it as though it will be reluctant to move too much too quickly, it also risks being overly constrictive if it holds rates at this level for too long, so we are likely to see the first cut being made sooner rather than later.”

Foxtons CEO, Guy Gittins, commented: “Homebuyers have been waiting patiently for an interest rate reduction and while it is largely expected to come this year, it seems as though they will have to wait a little longer still. The positive to take is that an air of stability has returned to the UK property market since rates were held at 5.25% last September and this has helped revitalise buyer activity levels in recent months. 

“In fact, it’s fair to say that the market has picked up the pace considerably and not only have we seen a 23% increase in sales enquiries versus this time last year, but there’s also been a 19% increase in viewings activity and we reported on 5 March 2024 that we’d seen a 31% increase in the number of offers being accepted. 

“The higher cost of borrowing certainly remains an obstacle for many buyers, but there continues to be an abundance of opportunity for those who can secure a mortgage with the help of an experienced mortgage broker like Alexander Hall.”

Jason Ferrando, CEO of easyMoney says: “Despite another surprise dip in inflation this week the Bank of England was always likely to maintain its slow but steady approach to managing the economy by keeping the base rate held at 5.25% for a fifth consecutive decision. 

“While this will no doubt disappoint the nation’s homebuyers who have been eagerly anticipating a reduction in the cost of borrowing in 2024, it will add further stability to the property market, whilst also allowing those attempting to form a nest egg a further period of stronger returns on their savings.”

Bradley Post, MD of RIFT, commented: “Households across the nation will be breathing a sigh of relief with inflation now seemingly headed in the right direction. However, while they may be seeing a reduction in the cost of some items such as household bills, many other household essentials have continued to increase in price. 

“As a result, the financial pressure they are under is unlikely to ease anytime soon and, for those forced to borrow in order to get by, today’s decision to keep interest rates frozen will do little to ease this pressure.”

Sam Reynolds, CEO of Zero Deposit commented: “It’s not just homebuyers who were hoping to see rates come down today, landlords were also in need of some property market positivity to help revitalise their appetite for buy-to-let investment. 

“Not only have many been suffering at the hands of expensive variable rate products, but all too often they will have been doing so while only repaying the interest on their loan. As a result, they will have seen the cost of their mortgage increase by a far greater margin in the long run compared to those making full monthly repayment. 

“With the cut on capital gains tax unlikely to act as the carrot to investors that the government intended, a rate cut would, at least, have reduced pressure on existing buy-to-let investors which in turn would have filtered through to tenants.”

Lomond CEO, Ed Phillips, commented:  “Having previously endured 14 consecutive base rate hikes since December 2021, it’s been a case of no news is good news for the nation’s homebuyers of late when it comes to the Bank of England’s decision on interest rates. 

“That said, they can be forgiven for feeling a little disappointed that we didn’t see a cut materialise today, particularly given this week’s inflation figures. 

“While a hold on interest rates has helped stabilise the market, the cost of borrowing remains a significant obstacle for many and while we’ve seen a strong start to the year, a reduction in interest rates would help to open the floodgates and drive market momentum forward.”

CEO of APRAO, Daniel Normal, commented: “While much of the residential market will have been hoping for a rate drop today, a continued freeze will be viewed as a positive for the nation’s housebuilders. 

“Not only will it further steady the market where buyer appetites for new homes are concerned, but it will also provide greater stability with respect to development finance.

“It’s this stability that will allow developers to better plan for the year ahead, giving them confidence to push forward with their ambitions to deliver more stock to the market.”

CEO of Open Property Group, Jason Harris-Cohen, commented: “It’s been a month of double disappointment for homebuyers so far, with a lacklustre Spring Budget providing no initiative to transact and now their hopes of a interest rate cut have also been dashed. 

“Inflation has been heading in the right direction and the property market is showing strong signs of recovery, however, a rate cut would have delivered the shot in the arm it needs to really move forward at pace.”

Director of Benham and Reeves, Marc von Grundherr, commented: “Continued certainty is no bad thing but homebuyers are crying out for some form of relief, particularly in London where the combination of high house prices and high mortgage rates are dampening purchasing power to the greatest extent. 

“Today was the last chance to offer some form of stimulus to help supercharge the spring surge in market activity and while we still expect an uplift in market activity, many buyers will remain on the fence until such time an interest rate reduction materialises.”

Co-founder and CEO of GetAgent.co.uk, Colby Short, commented: “Having reached the peak with respect to interest rates, the only way is down from here and homebuyers across the nation will have been hoping that today was the day we started our descent. 

“Unfortunately, we look set to remain where we are for that little bit longer and although today’s decision won’t kick start the market, it certainly won’t slow the momentum that has been building in recent months. 

“Buyer activity is on the up, offers are being made and sales are being agreed and we’re already seeing the resulting green shoots of positive house price growth as we enter the spring selling season and what is traditionally the busiest time of year for the UK property market.”

 Daniel Austin, CEO and co-founder at ASK Partners, said: “The fall in inflation announced yesterday will provide a much-needed boost to the economy and has set the stage for the expected hold in interest rates by the Bank of England. This trend is expected to persist, supporting a gradual decrease in inflation. It signals a positive trajectory for emerging from a mild recession, albeit maintaining pressure on those servicing debt.

As property loan extensions expire, borrowers will face the necessity of injecting fresh capital, returning assets to lenders, or selling in a subdued market. Properties entering the market will stimulate activity and present opportunities for well-capitalised buyers who perceive this as an opportune moment to acquire assets at significant discounts.”

Katie Pender, managing director of Target, said: “No surprises today as the Bank of England played safe and held the bank rate at 5.25% for the fifth consecutive month while it waits for inflation to drop further.  Borrowers will no doubt be pinning their hopes on cuts later in the year. In the meantime, it would be good to see some stability with mortgage rates themselves which are currently shifting at an almost unprecedented speed.  But, with a General Election on the cards and a potential change in Government, all is clearly not plain sailing. We will continue to work to support lenders and borrowers with the latest technology which is essential to speeding up decision-making and improving customer satisfaction.”

CEO of Octane Capital, Jonathan Samuels, commented: “Many have been critical of the Bank of England’s tentative approach to initially increasing interest rates, myself included, and had they acted with more gusto to begin with, it may have tamed the stubborn trajectory of inflation sooner. 

“Nevertheless, we’re now starting to see inflation ease and while swap rate movement remains unpredictable at present, there’s hope for homebuyers yet that a reduction in interest rates is on the horizon, which should settle the market and bring mortgage rates down over time.” 

Laura Suter, director of personal finance at AJ Bell, comments: “While interest rates have been held for another month, savers and mortgage holders have seen anything but steady interest rates. The rates on offer to savers have been bouncing around for months. At the same time mortgage rates have been on a rollercoaster ride so far this year. 

“It’s frustrating for homeowners that while the Base Rate is on hold, mortgage rates are dancing to their own tune. But that’s the reality of mortgage rates being priced off interest rate expectations – and us having no clear signal of when rates will be cut. We saw a huge drop in mortgage rates in January this year, as seemingly premature expectations of rate cuts took hold and competition in the mortgage market ramped up. But since then rates have risen again. We’re not near the highs we saw in September last year, but there has been a significant uptick.

“It means anyone who locked in a rate in January, ahead of their mortgage fix rate coming to an end this summer, will be feeling pretty smug right now. This yo-yoing of rates highlights how important it is to know when your fixed-rate mortgage is expiring and lock in a new deal six months ahead of that date. If rates fall during that period you can switch to a cheaper deal, but you’ve got an insurance rate locked in.

“The mortgage market can be a baffling place to navigate for the average homeowner, particularly at the moment. With Base Rate expected to drop from as early as June this year many will be weighing up fixing versus a tracker. And if they do fix, they will be weighing two years against five. All of this can mean people put off getting their new mortgage sorted – but the penalty for indecision is high. According to Moneyfacts, the average Standard Variable Rate is now 8.18%, meaning even a couple of months on that rate could be financially ruinous for some households.”

Karl Wilkinson, CEO at Access Financial Services, commented: “Although the 5.25% BoE base rate hasn’t come down this time round, it likely will by summer. 

“Yesterday’s promising inflation dip to 3.4% has already driven down swap rates to their lowest level since September 2021. This has given lenders more headroom to drop their own rates. For example, in the past 24 hours NatWest has already cut its remortgaging and tracker rates. 

“All in all, this is better news for borrowers, many of whom are really struggling with affordability.”

Arjan Verbeek, CEO of Perenna, said: “Despite inflation falling in February, consumers are still so reliant on factors outside of their control. Even with a stable, albeit high, base rate, the mortgage market remains turbulent as new mortgage deals are typically on offer for just over a few weeks¹, keeping consumers in a constant state of uncertainty.  

“Consumers will always be at the whims of factors outside their control when reliant on incumbent mortgage products. For true change, we need policymakers and the wider mortgage market to collaborate and work together for a better future, highlighting the benefits that long-term fixed-rate mortgages bring.”

Aaron Milburn, UK Managing Director at credit intelligence provider Pepper Advantage, said: “In holding rates, the Bank of England is signalling that it is continuing to take stock of the data to ensure that it will only start cutting when it is fully ready. 

“For the first time in over a year, key indicators are beginning to light up green on the central bank’s dashboard. Yesterday’s drop in inflation was welcome news, but other crucial data points are also showing that pressure on households is easing.

“After rising steadily for the past 12 months, mortgage arrears in our portfolio have started to plateau. Direct debit rejections – a type of late payments that serves as an early warning indicator – are also showing signs of easing following continuous increases over the past two years.

“With falling inflation and clear signs that financial pressure on households may have reached its peak, the scene is now set for the Bank of England to confidently consider cutting rates. Overall, this is positive news for borrowers as rate cuts appear within touching distance. The challenge now is to maintain the steady decline in inflation to the central bank’s 2 per cent target.”

Chris Little, Chief Revenue Officer, finova, said: “After six consecutive months, the base rate is still fixed at 5.25%, a sign that the volatile months of 2023 are hopefully in the rear-view mirror. As the market heats up, lenders could be incentivised to offer competitive rates, which may enable first-time buyers to access more affordable deals. Equally, with inflation falling further than the market expected, the price hikes we’re currently seeing may well be a temporary blip, with rates slowly coming back down over the coming months. 

“In recent days, the average availability of a mortgage product has dropped as low as 15 days, underlining an essential fact: in a dynamic market, speed is key. As such, lenders should take full advantage of technology to provide truly tailored pricing, creating a scenario where borrowers can access the most affordable rates without risking a lender’s liabilities. The pandemic kickstarted a tech revolution in our industry, but there is still work to be done. The future is real-time pricing that can adapt to market trends at speed – and the way to get there is by investing in tech early on.”

Ben Waugh, Managing Director at more2life, comments: “When compared to the economic conditions we were experiencing this time last year, the decision to hold the base rate at 5.25% is certainly a positive improvement. Not only does the continued stabilisation of the interest rate encourage a renewal of confidence in the market, but it also helps to dispel fears caused by the recent recession scare. This, alongside falling inflation, may encourage borrowers to assess their options in the mortgage market as we enter the Easter period.”

“While today’s decision is encouraging, we cannot ignore the reality the rise in the cost of mortgage repayments has created. We have exited a period of historically low rates, which have papered over the gap between modest rises in earning and rocketing house prices. Now, as payments rise, borrowers are having to access increasingly large multiples of their earnings and their affordability is challenged as a result. These borrowers urgently need comprehensive conversations with advisers about the options available on the market, including looking at later life options early to ensure they can set themselves up for a more secure financial future.”

Claire Flynn, a spokesperson for online mortgage brokers, Mojo Mortgages, said: “As widely expected, the Bank of England have today chosen to hold the base rate at 5.25%. This is the fifth time in a row that they’ve chosen to take no action, despite yesterday’s announcement that inflation is at its lowest in two and a half years, at 3.4%.

“Whilst mortgage holders or aspiring homeowners may have been hopeful that the fall in inflation would lead to a reduction in the base rate, lender behaviour has been more cautious. Although the beginning of the year saw average rates across the market, in recent weeks, we’ve experienced a return to volatility, with many mortgage lenders increasing their rates. 

“With such volatility, predicting how mortgage lenders will respond to this announcement is difficult. The hope is that inflation and swap rates continue to fall, which is likely to establish more stability in the housing market. However, many economists aren’t expecting the base rate to begin to fall until August.”

“Those on trackers can rest easy in the knowledge that their rates won’t increase for the time being, however, it’s more difficult to guess whether those on other types of variable rate will benefit or not. 

“The base rate has been 5.25% since August of 2023, and lenders have not always responded as predicted following previous announcements. In recent weeks we’ve seen the average two-year fixed (75% LTV) mortgage interest rate rise. Whilst some mortgage lenders have increased their rates, we’ve also seen some reductions recently.

“It’s, therefore, a good idea to speak to a mortgage broker if your current deal is due to end. There have been reports of mortgage rates being pulled within 24 hours, so securing an attractive deal quickly is recommended.”