It is indeed a big day in the dynamic realm of property after the Bank of England decided to make a shocking decision and keep interest rates on hold for the first time since 2021, leaving borrowing costs at 5.25% instead of the predicted increase of 5.5%.
This has come as a result of inflation slowing down within the country at a much faster pace than expected. The Bank of England’s monetary policy committee (MPC) decided to put a halt to the cycle of rate hikes due to the fall in inflation in August. This has also come after an astounding 14 consecutive rises in the last two years.
The Bank also predicts that the hike in prices will continue to lose momentum in the next few months, which will be crucial to the UK’s economy. It will also help to stabilise the cost of living for many.
However, it is to be noted that the rates will remain high to tackle the threat of inflation.
There were evident cracks within the Bank’s senior ranks when four prominent members of the MPC, including Jon Cunliffe, the outgoing deputy governor, lost against a narrow majority when pushing for a rise. The remaining 5 voices on the panel of 9 pushed relentlessly to exercise tougher actions to stabilise inflation levels.
The governor of the Bank, Andrew Bailey also voted to hold the rates and commented on the fall in inflation whilst also urging to ensure that “inflation returns to normal” and that the bank “continues to take the decisions necessary to do just that.”
The Bank’s governor, Andrew Bailey, who voted for a hold, said: “Inflation has fallen a lot in recent months, and we think it will continue to do so. That’s welcome news. But there is no room for complacency. We need to be sure inflation returns to normal, and we will continue to take the decisions necessary to do just that.”
What does this mean for property buyers and sellers? Is this good news for first-time buyers? How does this impact your mortgage?
Keep on reading to find out more about how the fall in inflation and the hold on interest rate rise impacts you.
How does an unchanged base rate affect UK home buyers?
Looking to buy a new second house? Or, perhaps, you are a first-time buyer looking for just the right sign to make the leap and buy your dream house.
How does the holding base rate at 5.25% affect you?
As you may have guessed, this is fantastic news for buyers. With inflation falling in August and no changes in the base rate after two tumultuous years of hikes, this move will undoubtedly create more confidence amongst buyers and general stability within the property market.
According to the Office of National Statistics and the Index of Private Housing Rental Prices, private rental prices in London bloated by 5.1% in the year to May 2023, up from an increase of 5.0% in the year to April 2023. According to the research, this is the highest annual percentage change in the city since October 2012.
With rental prices skyrocketing without any signs of stabilising, this hold on the base rate is a buyer’s dream come true as it ensures that mortgage payments will still be massively lower than monthly rental payments.
Our Sales Consultant, Dan Stern, shares his expert opinion on the matter, predicting the start of a positive phase in the market. This hold in fixed base rate at 5.25% gives lenders breathing room, says Stern. He elaborates that this could also potentially help bring fixed rates down whilst also encouraging more sellers to come to the market, leading to better property stock and, ultimately, more options for buyers to pick from.
The reduction in swap rates also allows lenders to be more competitive within the market.
If you are on a tracker, you may be able to pay slightly less than what you were paying 6 months ago. With bank rates going down, so will monthly repayments.
How does the 5.25% base rate hold affect sellers?
If it’s such good news for buyers, does that leave sellers at a disadvantage?
Our Sales Consultant, Jamie Jacobs, shares his expert opinion on the matter, detailing that this news will actually create a bigger demand for buying property, ultimately benefitting sellers just as much.
The rapid increase in rental prices, coupled with a steady base rate and competitive lending, equals a buyer-friendly market.
Jacobs further predicts that competitive pricing will drive the ever-frustrated rental generation towards buying property, especially first-time buyers who greatly benefit from stamp duty relief under £625,000 property purchases.
This news pushes renters to join the buyer bandwagon and enjoy competitive pricing, easier mortgage payments (compared to monthly rental payments), and higher stock levels in the market.
How does this stable base rate affect the market?
Overall, this is positive news for buyers and sellers. Whichever camp you may be on, you will ultimately benefit from a more stable market and base rate.
Finally, as banks are in the business of lending money and have observed a significant drop in mortgage products, this will force them to offer a more competitive rate despite the base rate.
While you're here, why not read "Debunking Mortgage Myths: Bank Rates vs Fixed Rates" or "Understanding Mortgage Rates: Swap Rates vs Base Rates"