Interest Rate News

The Bank of England has maintained the current interest rate at 5.25% for the sixth time in a row.

The decision comes as inflation, which measures price rises over time, remains above the Bank’s 2% target at 3.2%.

As well as the interest rate decision, the Bank has just released its latest forecast estimating what will happen to inflation and the UK economy.

The Bank of England Governor Andrew Bailey believes that it is “not yet” the time to cut interest rates.

Bailey recently said that he had seen “further encouraging signs” that inflation was coming down, but added policymakers had to be sure that it would fall back to its 2% target and “stay there”.

Industry reaction:

Nick Leeming, chairman of Jackson-Stops, said: “The Bank of England has taken a ‘no news is good news’ approach to today’s decision, opting to hold firm for another six weeks. While no change was widely assumed, the expectation is that June’s meeting will finally break the base rate deadlock and initiate a rate cut.

“The Bank of England’s hawkish approach may not be headline grabbing, but at least it isn’t a distraction for buyers or sellers who want to press on with their sales and searches. While everyone in need of a mortgage would prefer rates to fall significantly, interest rates of around 5% are not high by historic standards.

“It’s important to keep in mind that, while the past 18 months have been a time of economic headwinds, the exceedingly low rates that became the norm in the 2010s were the exception and not the rule.

“A pivot towards lower rates in June, even if only minor, would help to ease affordability constraints at the lower end of the housing market and help to ensure chains don’t break down once sales have been agreed.

“For now, today’s ‘hold’ should help to maintain the fragile momentum we’ve seen building in the housing market recently. Across the Jackson-Stops network in April we have seen a year-on-year uptick in viewings, new instructions and new buyer enquiries, which bodes well for a busier second half of the year.”

Mark Manning, managing director at Northern Estate Agencies Group, commented: “Looking at where inflation is, I believe a rate cut should have happened today, but there are clearly other factors at play and the BoE is obviously waiting for stronger signs that the cost-of-living crisis has fully abated.

“The market has been a lot busier than expected since the start of 2024 and demand has come back, resulting in lenders being inundated with applications. This has caused some of them to put mortgage rates up to try to slow the flow, but if the BoE had reduced rates, lenders would have had to follow suit and introduce lower rates.

“I hope that we see a decrease later in June, which will help to increase confidence in the market and stop people sitting on the fence while they wait for the expected reduction.”

Ahead Feather, director of Robert Anthony Estate Agents, commented: “The Bank’s decision to hold rates comes as no surprise but there are growing calls for a cut sooner rather than later. Afterall, inflation has been heading in the right direction and the property market is showing strong signs of recovery, and so a rate cut today would have delivered a much-welcome boost.”

Jonathan Bone, Mortgage Lead at Better.co.uk, said: “The base rate hasn’t budged since last August, causing headaches for homeowners looking to remortgage and locking out first-time buyers struggling with sky-high prices. Inflation has dragged its feet coming down, which has pushed up fixed mortgage rates once more.

“But there’s a glimmer of hope on the horizon: the market is buzzing with predictions of a potential interest rate cut sometime between June and August. Yet, without a crystal ball, it’s impossible to say for certain whether this will materialise.

“If you’re due to remortgage very soon, it’s worth knowing that some lenders will charge you for sending someone out to value your property. If you then find a different lender offering better rates after a potential Bank of England rate cut, you won’t get a refund for that original valuation, leaving you out of pocket. So, if you’re playing the waiting game to see what interest rates are doing over the next few months, be aware that not all lenders will charge you a valuation fee so speak to a mortgage broker who can point you in the direction of the lenders who offer a free valuation.”

Ryan Davies, strategy director at Bluestone Mortgages, commented: “Today’s decision will no doubt be a blow for would-be and existing borrowers who were hoping to see interest rates come down and mortgage payments to ease. Rates remain at their highest level for 15 years, putting sustained pressure on household finances and leaving many feeling squeezed.

“For those concerned about how ongoing affordability challenges will impact their homeownership ambitions, remember that there is always help at hand. Whether that be getting in touch with their mortgage lender, or speaking with a broker to understand the different options available, it’s our duty as an industry to help these customers step onto or up the property ladder.”