The Monetary Policy Committee (MPC) has voted once again to hold interest rates at 3.75% at today’s meeting.
While an increase in base rate was always possible, it never looked likely. Inflation sticking at 2.8% in May was a welcome surprise and took some pressure off the rate setters who have to balance the secondary effects caused by the Middle East conflict with concerns for the loosening labour market and signs of a weakening economy.
However, unlike the last meeting where only one member voted for a quarter-point increase to 4%, this time around two members voted for such a rise. The Committee said it would continue to monitor closely the situation in the Middle East and ‘how its impact propagates through the economy’.
Commenting on the decision, Mark Harris, chief executive of SPF Private Clients, said:
“A steady hand on the tiller, rather than a knee-jerk reaction to raising rates, is vital for overall market stability and confidence, which is why we welcome today’s decision to hold interest rates.
“Lenders have been trimming their mortgage rates in light of falling Swap rates, which underpin the pricing of fixed-rate mortgages, and we expect this trend to continue.
“Some clients are favouring base-rate trackers, as these are cheaper than their fixed-rate equivalents at least initially, and would require a couple of quarter-point increases in base rate in order for borrowers to be worse off.
“However, what suits one person may not suit another: if you can’t afford to be wrong – that is, if interest rates were to rise, you would struggle to pay your mortgage, then a fixed rate makes sense. Those opting for fixed rates have also been leaning towards shorter-term products over their longer-term equivalents, as they feel the increases in fixed-rate pricing in recent weeks are likely to be temporary, so it is unwise to lock in at current highs.
“With so much uncertainty and volatility with regards to Swap rates and mortgage pricing, independent advice is more valuable than ever. Get in touch with SPF Private Clients to find out what options are available to you.”
