The Bank of England yesterday voted to keep interest rates at the record low level of 0.1%, but has signalled they are likely to increase in the coming months.

Andrew Bailey, the Bank’s governor, said the decision was a “very close call” and put the City on notice that interest rates were likely to rise from the lowest level in the Bank’s 327-year history over the coming months.

Markets took the governor’s comments to mean that the first increase in borrowing costs since 2018 would come either in December or, more probably, in February next year.

Industry reaction:

Dominic Agace, chief executive of Winkworth, said: “A rise seems likely to happen in the near future and the Bank of England decision to hold off for a month reflects that. We have seen in the last few weeks several mortgage lenders anticipate this with mortgage rates nudging up ahead of time.

“However, it’s encouraging to see these have been small moves with mortgage rates moving from below 1% to the best five-year fixes still coming in at around 1.2%. This still remains incredibly cheap on an historic basis.”

Iain McKenzie, CEO of The Guild of Property Professionals, says: “The absence of an interest rate rise from the announcement provides much-need breathing space for those worried about their mortgage payments.

“Impending rises are only likely to be delayed for a short while, so it is worth preparing for the effect it could have on your chances of getting a mortgage.

“Over 80% of homeowners are tied into fixed-rate mortgage deals, so it is unlikely to affect most people in the short term.

“Any future rise in interest rate could potentially put the brakes on the house price boom of the past year, with more prospective buyers possibly deterred by the increased costs of buying a home.”

Nathan Emerson, Chief Executive at Propertymark, said: “It is only a matter of time before the base rate is increased, with many having expected that to come yesterday.

“When it does, mortgage rates will inevitably increase, but it is important to keep things in perspective, as the cost of borrowing remains low when compared to historic levels.

“Crucially, the market remains in a strong position to contend with the mooted rises, with our latest Housing Market report showing an increase in both the number of average sales and buyers on the books.”

Nicky Stevenson, managing director at national estate agent group Fine & Country, may be of interest.

She said: “The status quo has been maintained despite Andrew Bailey expending a lot of energy raising expectations of an imminent hike.

“While the delay in raising rates will give first-time buyers, in particular, some breathing space, the concern will continue to be whether this just kicks the inflationary can down the road.

“What the housing market, and borrowers, don’t want to see is a series of rapid rises in quick succession. Already, some buyers will feel aggrieved that, thanks to the large hints dropped of the past month, several high street lenders have jumped the gun and increased borrowing costs already. This has already begun to squeeze affordability and with rate rises a question of when, not if, borrowing costs are unlikely to revert back to what they were simply because of a small delay.”

Simon Gammon, managing partner at Knight Frank Finance, said: “The Bank of England decision to hold the base rate at a record low 0.1% gives borrowers a little more breathing room, but it is increasingly clear that a rate hike isn’t far away.

“Borrowing costs are already rising in anticipation and mortgage rates suggest we are entering new territory for large numbers of borrowers. A fifth of all outstanding mortgage debt is at variable rates, which amounts to about £315bn. That’s a lot of borrowers that will soon see an increase in their monthly outgoings.

“Any rise in the base rate is likely to be small and measured\. However, economists are predicting multiple rate rises during 2022, so we are advising borrowers to act quickly, even if they are locked into a deal. Mortgage offers can be held for six months, so it’s worth speaking to an expert to see what’s possible.”