UK interest rates have been left unchanged at 5.25% by the Bank of England.

The monetary policy committee (MPC) voted to leave rates as they are or the fourth consecutive month.

Notablty, for the first time since the financial crisis in 2008, there has been a three-way split on whether rates should rise or fall.

One member of the committee voted for a rate cut, two members wanted a rise to 5.5%, while the remaining six people on the panel agreed they should remain unchanged.

The signs are that interest rates have peaked and the next move will be a cut, but that could still be some months away, even as inflation will soon fall to the 2% target.

Money markets are predicting that Threadneedle Street will reduce interest rates by five quarter-point cuts later this year, down from the existing levels to about 4%.

Industry reaction: 

Nick Leeming, chairman of Jackson-Stops, said: “The Bank’s decision to stick to its knitting and hold rates was largely expected by the market, but is still welcome news. While bringing interest rates down does encourage greater borrowing which in turn stimulates greater activity, it is important that the Bank of England does whatever is necessary to avoid fuelling inflation.

“The upside of Bank of England’s inaction today provides stability to the market, allowing buyer and seller confidence to build after a subdued year of activity. Across the Jackson-Stops network we are already seeing a positive uptick in the number of prospective buyers and new properties coming onto the market in January, which will hopefully pave the way for a busy spring. Though the market will remain cautious in its optimism; only as the year progresses will we be able to determine more clearly how buyers behaviour will respond.

“The prospect of a General Election, and interest rates staying high, by relative standards, is likely to play on the minds of those considering how best to time their next move. But the property market must take some comfort in its own resilience, having navigated far higher interest rates than we see today, and are well placed to do the same again.”

 

Guy Gittins, CEO of Foxtons, commented: “A freeze on interest rates since September of last year resulted in 2023 finishing with a far higher degree of mortgage market positivity than many had forecast and it’s now clear that this positivity has carried over into 2024. We’ve already seen a promising start to the year compared to January last year, as buyers have returned to the market.

“However, the potential now is that mortgage rates could start to climb following a fourth consecutive decision to keep the base rate frozen at 5.25% and we’ve already seen evidence of lenders increasing swap rates in recent weeks in anticipation of today’s news.

“This will further add to the air of urgency shown by buyers of late, who have been encouraged by sub 4% mortgage opportunities and have been keen to secure them while they are available.”

 

Nathan Emerson, Propertymark CEO, commented: “It is positive to see that many people intending to buy their first home or sell their current one won’t be hindered by an increase in interest rates.  

 

Matt Smith, Rightmove’s commentator, said: “As painful as rate rises have been for many people, there are increasing signs that Base Rate rises are having a real impact on the economy, and inflation is heading in the right direction. Another hold in the Base Rate today also shows that the Bank will also be cautious not to overshoot Base Rate rises, and will be keen to maintain the current stability.

“The market appears more robust than last year, evidenced by the fact that the surprise uptick in inflation a couple of weeks ago didn’t derail the downward trend of mortgage rates. The big picture remains the same – the Base Rate is unlikely to rise further, and mortgage rates have some room to come down further before settling.

“It’s been a promising start to the year for housing market activity, with more people than this time last year listing their home for sale, looking to buy, or getting a Mortgage in Principle to see what they can afford. For anyone thinking of moving but still holding back from taking action, the slight uptick in average rates in some lower Loan-To-Value brackets this week is a reminder that average rates won’t fall forever and mortgage rates appear to be settling after significant drops at the start of January.”

 

Verona Frankish, CEO of Yopa, said: “Today’s decision won’t necessarily add to the property market positivity seen so far this year, but it certainly won’t diminish it either.

Whilst the cost of borrowing remains higher than the nation’s borrowers have become used to, they should be reassured that we’ve likely seen the peak where interest rates are concerned and that any future movement will be downwards.

This should help draw more buyers back to the market and we anticipate that the uplift in market activity seen during the closing stages of last year will continue to build throughout the year ahead.”

 

Jason Harris-Cohen, CEO of Open Property Group, commented: “Any amendment to the base rate takes time to filter through to the markets and longer still before we see it impact consumer confidence. We’re only now seeing the benefit that has come from the previous freeze on interest rates and so to have lowered them today would have been somewhat premature.

However, given this week’s reading on inflation, we hope that the next decision will be a cut. Failing to do so could plunge the economy into a period of negligible growth for the foreseeable future and it’s about time we started to stimulate a recovery.

We’ve already seen signs that the property market is heading in the right direction following the first decision to freeze rates at 5.25%, with mortgage approvals starting to climb consistently. But it’s about time we throw the nation’s homebuyers a bone to help kick start the market and reverse the downward house price trends of recent months.”

 

Marc von Grundherr, director of Benham and Reeves, said: “The property market has made considerable strides forward since the Bank of England first held the base rate at 5.25% and so today’s decision will only bring more certainty to buyers, helping to further cultivate the positive market landscape that has been developing.

Yes, interest rates remain at their highest in over 15 years, however, this isn’t the cause of a diminished appetite for homeownership. Increasing rates, market uncertainty and ever changing mortgage offers are the key deterrent and buyers can now rest assured that the only way is down with regard to interest rates over the coming year.”

 

Ruth Beeton, Co-Founder of Home Sale Pack, said: “While it’s reassuring to see continued certainty in the form of a freeze on interest rates, it will do little to boost an otherwise sluggish property market which is in desperate need of stimulation.

Yes, we’ve seen a marginal uptick in mortgage market activity in recent months, however, it remains a challenging environment for buyers and this leading to far longer transaction times, not to mention an increase in the number of sales falling through.

Hopes of a rate cut later in the year should help, but until they do materialise, the property market is likely to plod along in the state of limbo seen for much of the last 12 months.”

 

Colby Short, co-founder and CEO of GetAgent.co.uk, commented: “Today’s decision to hold the base rate at 5.25% marks six months since the last interest rate hike and the overarching opinion is that we’ve now seen the peak in this respect.

This has helped to stabilise the market and we’ve seen mortgage rates start to reduce, tempting buyers back the fold and increasing mortgage approval numbers in the process.

This has delivered a much needed shot in the arm to the UK property market and it’s now a far more attractive place to be for the nation’s sellers who have been desperately waiting to make their move.”

 

Steve Seal, CEO, Bluestone Mortgages, commented: “The Bank of England’s decision to continue to hold rates at 5.25% for the fourth consecutive month will be welcoming news to existing and prospective homeowners While it’s unlikely that the first rate cut is anytime soon, there feels to be a growing sense of confidence within the mortgage market, supported by a dose of healthy competition between lenders reducing their rates.

“However, for those who are still worried about how they can climb onto or up the property ladder, rest assured that there is always help at hand. It is the duty of this industry to signpost customers to the best available solutions catered to their unique circumstances so that they can make their homeownership dream come true.”

 

Jonathan Bone, Mortgage Lead at Better.co.uk, said: “Despite the unexpected increase in inflation towards the end of last year, the Bank of England decision-makers have held their nerve and maintained the base rate. This provides a modest silver lining for homeowners, as it encourages lenders to keep their rates stable.

“Forecasts from experts suggest a potential decline in the base rate by July and even more so by the end of 2025 – positive news for those aspiring to step onto the property ladder.

“Nevertheless, the reality stands that homeowners reaching the end of their fixed deals will need to allocate more funds to cover the higher cost of their mortgage repayments. The average two-year fixed rate has doubled compared to two years ago and experts anticipate that rates may not dip below 3.5% for several years.

“I strongly recommend speaking to a mortgage broker as soon as possible so they can look at your options, including variable rate and tracker mortgages. A broker will help you secure the right deal for you, even if mortgage rates fall during your application.”