With some early signs recently that activity and sentiment with the UK property market has been improving, today’s news that the Bank of England’s Monetary Policy Committee (MPC) has decided to hold the key UK interest rate at the current level of 5.25%, will be welcome news indeed.
That’s especially so for Mortgage and Property professionals – as well as to millions of mortgage holders and prospective property buyers – who have faced such challenges throughout the year with successive rate hikes.
All eyes across the sector are now focused on how quickly we might start to see the Bank reducing interest rates in 2024 , given the economic data which has shown that the economy is slowing down in response to higher rates. The market is now expecting there to be hefty UK (and US) interest rate cuts next year as a result.
Mortgage and Property professionals have been sharing their reaction to today’s Bank of England interest rate decision as follows:
Laura Suter, director of personal finance at AJ Bell, comments: “The Bank of England has held interest rates for the third time, with six ratesetters voting to hold them at 5.25%, while three wanted to push rates up to 5.5%. It means Base Rate remains at its 15-year high and we have a reprieve from any further moves in the rate until February, when the MPC next meet.
“You could get whiplash from how quickly markets have moved from predicting the timing and size of the next interest rate hike to talking about sizeable rate cuts. Despite protests from many at the Bank of England that rate cuts aren’t on the agenda just yet, markets are now pricing in a full percentage point cut to interest rates by the end of next year. What’s more, the markets are betting on the Bank taking the axe to rates from as early as May next year, rather than the previous expected timing of Autumn.
“All this is good news for mortgage holders and less favourable news for savers. And despite the Bank taking no action today, it’s time for anyone with a mortgage or savings to take some action if they haven’t got their financial ducks in a row yet.”
“Some mortgage companies go out ahead of the news and have already announced rate cuts. As we move closer to the time when the Bank starts cutting rates we’ll see mortgage rates continue to drop. This is good news for anyone who is coming up to their remortgage date soon, as they will pay slightly lower rates. On large levels of borrowing even small reductions in mortgage rates can result in meaningful sums saved on monthly payments.
“But despite falling rates, higher interest rates will cause pain for homeowners for years to come. Even if the Bank does start cutting rates in May next year, there is no expectation that they will be cut rapidly and by large amounts – which means they will take a long time to return to more reasonable levels. And homeowners are unlikely to ever see rates as low as they previously were. We know that around 1.6 million mortgages deals are due to end in 2024 and until we see meaningful cuts from the Bank of England those homeowners will still be paying hundreds, and in many cases thousands, more each year for their mortgage.
“Doom-laden headlines about higher mortgage rates may lead many homeowners to take an Ostrich-like approach and stick their head in the sand. But the worst option for someone whose mortgage deal is ending is to drop onto a Standard Variable Rate (SVR) mortgage. As Base Rate has shot up these have reached eye-watering levels and even a couple of months on this rate could equal financial calamity for some homeowners. Instead, homeowners should speak to their mortgage provider or broker to work out their options, assess how much higher their mortgage might be and plan for the increase in costs.”
John Phillips, CEO of Spicerhaart and Just Mortgages said: “Instead of a cut and an early Christmas present or a rise and becoming the Grinch that stole Christmas, the Bank of England went with the widely expected option of holding rates for the third time in a row. Even with a number of positive indicators, particularly cooling inflation, the bank is still maintaining its position of ‘higher for longer’ – although many are predicting a rate cut early next year.
“Nevertheless, another hold brings continuity and stability and provides an opportunity for lenders to reassess and reprice. It will no doubt add further ammo to the ongoing rate war among lenders – which is great news for borrowers and prospective buyers. We mustn’t forget though that this will still be higher that what many clients perceive as ‘normal’, highlighting the real need for brokers to be proactive in educating clients on the realities of today’s market and what it means for them and individual situation.
“This will continue to be a big focus for the year ahead, as affordability will likely remain a key challenge for many borrowers. There’s no question the successful brokers next year will be those that are getting the fundamentals right, having those deeper conversations and delivering a five-star service and experience – generating referrals and new business in the process. This is particularly pertinent with recent reports suggesting gross mortgage lending could drop in 2024.”
Sarah Coles, head of personal finance, Hargreaves Lansdown: “This interest rate pause was signposted more impressively than the entrance to a signpost symposium. Unless something wildly unexpected happens, we’ve hit the top of the rate rise cycle, and the question is no longer what will happen next to rates, it’s how long we’re going to wait until we see cuts, and what this means for mortgages.
“Tracker mortgages will hold steady when rates are on hold, because they move with the base rate. Fixed rate mortgages, meanwhile, are on their way down – and the average two-year rate has dropped below 6%. Fixed rates are mainly driven by expectations, and right now the market is expecting Bank of England rate cuts sooner rather than later, which is feeding into cheaper deals. We can expect more of the same in the coming months.
“Of course, for anyone who fixed two years ago or more, even after the falls of recent weeks, a remortgage is going to be incredibly painful, because they’re likely to have fixed for less than 2%. We’ve seen nosebleed-inducing ups and downs in the mortgage market over the past two years – with two-year fixed rate deals hitting a recent peak of 6.85% at the start of August, before dropping back below 6%. However, this is a completely different mortgage landscape to two years ago, and there’s no expectation that we’ll return to the good old days in a particular hurry.”
Karl Wilkinson, CEO at Access Financial Services, said: “Rates are now levelling off – I suspect the Bank of England will wait to see how the market adjusts. Christmas spending will give some false positives. So, all things being equal, we could see the base rate remain at this level for a few months to come.
“The drop in mortgage rates caused a stir in the house market last month with estate agents seeing sales escalate, so I expect the decision to maintain the base rate will further boost confidence in the housing market and swap rates for the foreseeable future.”
Mark Tosetti, partnerships director at Movera, commented: “Today’s rate-setting decision by the Bank of England is even less of a surprise than it was last month. Especially after yesterday’s shock shrinkage on October’s GDP. The signs are clear that the UK economy is losing momentum as we approach the end of the year.
“If inflation continues to fall, it will be very interesting to see what the Bank does next time round. Is this just the beginning of a run of flat rates? Very possibly.
“How will this affect the home-moving market? Mortgage rates have continued to fall since the summer. If inflation drops further, we could well be looking at average mortgage rates of below five percent again in 2024, which would be no small relief for both new borrowers, and homeowners looking to remortgage.”
Ben Waugh, Managing Director of more2life, comments: “The stabilising of the interest rate at 5.25% is just another indication that the turbulence of the past year is behind us. As the third meeting in a row where rates have stabilised, this decision also signifies a longer-term confidence returning to the market. As we see inflation rates steady and house prices settle during the Christmas period, many first-time buyers will be more inclined to take their first step onto the property ladder.
“Despite these encouraging signs of clearer waters ahead, it is still important to remember that rates remain at an all-time high, with the cost-of-living crisis also posing affordability issues for borrowers. It is therefore crucial that financial advisers are on hand to support customers, using their expertise to assess and evaluate the range of products available on the market. This is particularly true when considering the over-55’s group, as many of them are not aware of the options available to them or how best to find a tailored solution suited to their specific needs.”
Arjan Verbeek, Founder and CEO of Perenna said: “Rate stability may continue but the market’s structural problems persist. Over 1m homeowners by end 2024* will suffer an increase to their monthly mortgage payment due to the design of their mortgage product. This isn’t fair.
“It’s time for the UK mortgage market to change. Regulators and the Government need to build the foundations for a fairer housing market and place the same weight and importance behind long-term fixed mortgages as they do short-term. Flexible long term fixed rate mortgages – like those we’ve seen in Denmark, and the US – allow homeowners to get on with their lives without worrying about market volatility. Now is the time to take action and fix our broken mortgage market.”
Matt Surridge, Sales Director at MPowered Mortgages, comments: “The market continues to benefit from increased stability across the board, reflected in a much more stable base rate from the Bank of England. However, it is important that borrowers and brokers are not unrealistic about what to expect over the coming year.
“Mortgage rates are likely to remain elevated over the next 12 months, and the impact of the cost-of-living crisis will mean many individuals are dealing with significant financial pressures on a daily basis. UK Finance data shows that 900,000 borrowers will experience ‘severe mortgage rate shock’ in 2024 when their existing fixed rate deals come to an end with monthly payments set to rise by more than £1,000 for some. This is worrying, which is why we believe rates need to come down at a much faster pace than is currently forecast.”
Phil Lawford, National Account Manager at Saffron for Intermediaries, comments: “It is no real surprise to see the Bank of England maintain the base rate as it looks to restore stability after a fairly volatile year for the mortgage market. This should help to instill some much-needed consumer confidence, and in turn, drive market activity. A lot of buyers are still sitting on their hands hoping to see rates return to the record lows we saw during the pandemic, and, while rates are still competitive, it is unlikely that they will fall significantly in the next year.
“Brokers need to continue reassuring borrowers that there are solutions available that will work for them, and that they should press ahead with their homeownership ambitions if the circumstances are right for them. Rates can be unpredictable – for example, if you wanted to buy a house in 1971, when rates sat around 7%, but held off until they reduced, you would have been waiting for 22 years.
“And although it is often the focal point, the mortgage rate is far from the only factor that brokers should be highlighting to clients, particularly in the complex lending market. Brokers and client should both be thinking holistically as they look to find the best solution for their borrower’s individual circumstances, a task Saffron is always more than happy to help with.”
Matt Thompson, head of sales at Chestertons, says: “With interest rates having remained at 5.25% over the past months, buyers have been more comfortable to move forward with their property search. Today’s news that rates remain at this level; and economists predicting a possible reduction in 2024; provides a slightly more favourable market outlook which could see further house hunters deciding to enter the market over the next few months.”
Adam Oldfield, chief revenue officer at Phoebus Software, says: “After a year of ups and downs it is good to end the year on a more stable footing. Although rates aren’t yet going down, the fact that they are not going up is a relief. Borrowers and potential purchasers can’t have failed to notice that overall mortgage rates are coming down. This may give a boost of confidence going into the new year when things, historically, start moving. Given that a large number of properties have come to market across the country in the last month, we could see a real flurry of activity in January.
“The only sticking point would be if the inflation figure next week shows an increase. The unexpected fall in GDP yesterday has certainly given economists pause for thought and as wages continue to increase it is hard to predict what will happen next. On a positive note swap rates are still coming down, which gives lenders more scope to ease the borrowing burden for those coming off fixed rates and those hoping to take up new mortgages.”
Adrian Anderson, Director of property finance specialist says: “It comes as no surprise that the Bank of England’s Monetary Policy Committee has retained the base rate at the 15 year high of 5.25%.
“Whilst the base rate may have been maintained today, homeowners are seeing fixed mortgage rates creeping down with consecutive drops over the past few months as the markets predict base rate to fall in 2024. This will be welcome news for over a million existing mortgage holders who are still to remortgage since interest rates skyrocketed following Truss’ mini budget in 2022.
“Looking ahead, many feel that the base rate will begin to fall in spring / summer 2024, possibly reaching as low as circa 4.25%-4.50% by year end. That said, global political and macroeconomic factors may hamper these predictions.
“For those with fixed rate mortgages coming to a close in 2024, research your options six months ahead of the rate end and work with your mortgage broker to secure the very best rate right up until the end of your current term. I would also advise clients, where possible, to consider overpay on their existing mortgage to reduce the capital sum and thus help the LTV ratio when they remortgage.
“For those seeking a new mortgage, such as first time buyers, there are lots of factors to consider when choosing a product which will be best suit their personal circumstances, factoring in arrangement fees, valuation and legal conveyancing costs as well as early repayment charges and the headline rates.”
Foxtons CEO, Guy Gittins, says: “We’re now seeing clear evidence that the property market has weathered the storm of economic uncertainty this year and is now taking positive steps in the right direction.
Since the Bank of England first decided to hold rates at 5.25%, mortgage approval numbers have increased, sellers have continued to return to the market and UK house prices have climbed consistently on a month to month basis.
While hopes of a rate reduction were probably a tad optimistic this side of the Christmas period, a third consecutive decision to keep the base rate held will only add to this growing property market optimism.”
CEO of Octane Capital, Jonathan Samuels, commented: “Although the Bank of England’s strategy appears to be working, it’s important to note that the fall in headline inflation has been largely driven by a reduction in food and energy prices.
“Core inflation has proved more stubborn and so the decision to keep the base rate as it is a sensible one and we expect one made in readiness for a rate reduction in the new year.
“The result of holding rates whilst inflation is falling gives the effect of a rate rise in real terms and this will continue to benefit the economy.”
Richard Dana, Founder & CEO, Tembo Money said: “It feels like the economic indicators are moving in the right direction so it’s no surprise that the rates have been held. I’m not so bullish they will come down that quickly as our old friend inflation is still there bubbling away in the background. It feels like the housing marketing is more active, we’ve had a very busy start to December – which bodes well for a better 2024.”
CEO of RIFT, Bradley Post, commented: “While households across the nation may have been hoping for an interest rate reduction in their stocking this December, the decision to hold rates will still be a welcome one as we approach the Christmas break.
“Many households will be reliant on borrowing to help cover the heightened spend of the Christmas period and so a static base rate will, at least, ensure that they can plan accordingly with greater confidence.”
Jason Ferrando, CEO of easyMoney commented: “A third consecutive decision to keep interest rates held suggests that while the economic picture is improving, there’s still some ground to be made and inflation remains someway above the target of two percent.
“While today’s decision won’t ease the financial burden of the nation’s borrowers, it will at least provide further stability as 2024 approaches and this should help strengthen the property market, in particular.”
Managing Director of Apex Bridging, Chris Hodgkinson, commented: “A hold on interest rates has helped to stabilise the UK property market and we’ve already seen an uplift in buyer activity as a result, as well as positive monthly house price growth.
“Today’s decision will only help to steady the ship further, providing buyers and sellers with a greater degree of certainty as we approach the new year. With the expectation of a rate reduction on the horizon, the outlook for 2024 is much more positive than it was earlier in the year.”
Chris Little, Chief Revenue Officer at finova said: “As temperatures continue to drop, today’s decision to keep the base rate at a steady 5.25% will certainly warm the hearts of many UK homebuyers. But even as mortgage rates edge downward following consecutive pauses in the base rate, rates are still high compared to the last 15 years. Affordability will remain a barrier to homeownership for many would-be borrowers and it will be some time before transactions recover to where they were last year.
“As we step towards the new year, some buyers will still be looking to settle down and lenders and brokers should plan to ensure they are meeting borrowers’ shifting financial needs in 2024. Increasingly, financial institutions and broker firms alike are waking up to the value of technology to streamline their service. For lenders, investing in these digital tools early on will ensure they are best placed to give their clients access to the most personalised and fair rates on the market, all while protecting their own risk.”
Nathan Emerson CEO Propertymark comments: “There is little denying this year has been difficult for many, with a harsh mix of high inflation and elevated interest rates to contend with. There is no shying away from the fact many households have struggled to get by each month.
“With rates remaining unchanged yet again, Propertymark is optimistic the peak of the turmoil has now hopefully passed, but it will take a little time to see full momentum and confidence back within the housing market once again.
“It’s also important to highlight almost 1.4m households across the UK have fixed-rate mortgage deals that will come to an end over the coming twelve months, so the road to a fully robust housing market will be closely linked and we may see a few more bumps in the road before a full recovery.”
Karen Noye, mortgage expert at Quilter: “The Bank of England’s 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. 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 that as a result of limited housing stock prices have modestly increased.
“However, the broader economic context remains challenging. The ongoing cost-of-living squeeze, with rising energy costs and still relatively high mortgage rates continue to strain household budgets. This 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. However, those looking to remortgage or secure new mortgages may still face relatively high rates and stringent lending criteria. Lenders however 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. Households and borrowers 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.”
Paresh Raja, CEO of Market Financial Solutions said: “It’s almost two years to the day since the Bank of England began its rate hiking cycle, but today’s decision to maintain rates for a third consecutive time is as sure an indicator as any that it has now peaked. It remains very hard to predict where the base rate will sit in six or 12 months’ time. For now, though, the property market can only benefit from it holding flat – buyers can adapt to the higher rate environment, with the stability allowing them to properly assess how much they can or want to borrow.
“The house price indices are showing green shoots of recovery, meaning property investors can head into the festive period with a cautious sense of optimism – even if a rate cut won’t be under their Christmas tree this year, many expect the base rate to fall next year. However, as always, lenders and brokers must stay on the ball, offering flexibility and certainty in the here and now to help people invest in the property market with confidence in 2024.”
Robert Winfield, Managing Director at Chartwell Funding said: “I was expecting a hold today but some of my colleagues dared to talk about a reduction as SWAP rates have plummeted this week. This is great news for any needing to remortgage in the next few months and with market competition ramped up due to a lack of demand, the start of 2024 will be an interesting time.
“I was expecting rates to start dropping in Q3 of 2024 but recent events have made me rethink this. It is probable now that rates start to reduce at the end of Q1 or the start of Q2. This will be welcomed by both residential and commercial borrowers as January and February are traditionally tough months on many fronts.
“I am expecting unemployment to rise in 2024 as employers continue with the mantra of paying more to less (paying your best staff extra to work harder and compensate for a smaller workforce). Wages will therefore keep pace with inflation in 2024 and the biggest concern I have is how many small businesses decide to call it a day and further impact the High Street – scary times for many!”