Mark Harris
Chief Executive
The Bank of England has held base rate at 5.25 per cent for the seventh consecutive meeting of the Monetary Policy Committee.
This decision was widely expected, despite inflation hitting the Bank’s 2 per cent target in May, given concerns over the strength of the economy and underlying services inflation, which remains high. The impending general election may also have influenced the decision to hold rates, with the Bank wishing to appear impartial.
The MPC voted by a majority of seven to two to maintain Bank Rate at 5.25 per cent, with two members preferring a quarter-point reduction to 5 per cent. This was the same split as seen at the previous meeting, suggesting the majority of members remain unconvinced that inflation is under control enough to start reducing rates.
However, reducing rates will increase borrower confidence and give the housing market, and wider economy, a welcome boost. It is time for the Bank of England to be bold and start cutting rates, ideally at the next meeting in August.
As far as mortgage pricing is concerned, what the Bank of England does with base rate is only part of the picture. Swap rates, which underpin the pricing of fixed-rate mortgages, have been declining in the past few days and edged down further on the back of the latest inflation news. A significant reduction in Swaps over coming days may lead to mortgage rate reductions. However, it is only when the market feels the tide within the Bank has turned that sustained reductions in fixed-rate mortgages will reach the market again, bringing some good news for borrowers.
Borrowers who are due to take out a mortgage this year should plan ahead as much as possible to account for higher rates. Mortgage products can be booked up to six months before needed, so speak to our advisers to find out what’s available. If when you come to take out the mortgage rates have come down, borrowers should be able to choose a lower rate.
