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Interest Rates Held at 5.25% for Fifth Time in a Row

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    How Does the Held Interest Rate Affect UK Property?

    The Bank of England (BoE) today revealed that they are holding the rate for the fifth consecutive time at 5.25%.

    The current rate is the highest for nearly 16 years. The Bank has been trying to reduce inflation to 2% from the current 3.4% without harming the economy, which has resulted in high rates and a cautious approach to cuts.

    Let’s see what this interest rate announcement means for the property market in 2024.

    Further Reading: Read the RWinvest buy-to-let property guide and learn more about the UK property market and the best buy-to-let areas.

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      Interest Rate Held But When Will Rates Come Down?

      Two leading economic factors the BoE considers when deciding whether to cut rates are service inflation and wage growth. Job losses and economic output also play a role.

      According to Bank governor Andrew Bailey, the Bank is waiting to see proof of inflation coming under control before they can cut rates.

      The BBC states that the votes of the nine-member committee can give a clue about when cuts will happen, changing expectations in financial markets and, in turn, changing the actual mortgage and savings rates. In this case, the Bank voted 8 to 1 to hold interest rates. One member voted to reduce the rate down to 5%.

      Martin Weale, a professor of economics at King’s College London, said: “A gradual build-up of people voting for a cut is often an indication that one is to come”.

      The BBC reports: “After inflation fell to its lowest level in two and a half years last month, economists expect rates to start falling in June.”

      Learn More: If you’re considering a property investment in the UK, you can find out about stamp duty for a second home or how to calculate market value with our latest guides.

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      What Difference Will This Make to the UK Property Market?

      One of the most significant impacts of the Base Rate on the property market is mortgage rates. This, in turn, can affect house prices. If mortgages become more affordable, they will point to a potential rise in property prices.

      According to Rightmove, casting aspersions about when mortgage rates will see sizable drops is difficult as rates depend on more factors than just the Base Rate, including inflation and other economic forces.

      Despite the currently high Base Rate and caution from mortgage lenders, the UK housing market has experienced a positive start in 2024. There have been encouraging signs such as more homes for sale, an uptick in market activity, and average asking prices surged in March, marking the highest increase in 10 months.

      The Bank of England’s next meeting is in May.

      Find out more about the UK property market with our dedicated buy-to-let area guides covering topics such as investment property available in Leicester and Belfast investment properties.

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      Jessica Ferris

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      Jessica is a property content writer at RWinvest. Keeping a close eye on the UK property market, Jessica helps our readers stay informed and up to date on the latest market news and statistics.