Will the Held Interest Rate Change the UK Property Market?

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What Are Property Experts Saying About the Held Base Rate?

The Bank of England (BoE) announced their decision to hold the interest rate for the fifth consecutive time this week.

The current rate of 5.25% is the highest it has been for nearly 16 years, and it has been held at this level since August 2023. Previous to that, there was a run of 14 increases.

By keeping the interest rate high, the BoE hopes to curb inflation, which is why they have been cautious about cutting rates despite the potential negative economic impact. Inflation has been falling since it peaked in October 2022 and now stands at 3.4%. However, this is still a way off the Bank’s target of 2%.

Keeping an eye on these economic announcements is vital in all investment property strategies, and those in the property industry have been keenly tracking the changes in rates and sentiment to help them make their current investment decisions.

So, is buy-to-let a good investment in this current economic climate? Let’s see what property experts had to say about this week’s announcement.

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Mixed Reaction to Held Base Rate Reaction

There has been a mixed reaction from the property and real estate industry regarding today’s announcement. While the stability of a held rate has signalled relief to some, others see this as a missed opportunity to cut the rate and stimulate market activity.

Rightmove’s mortgage expert Matt Smith commented: “Although today isn’t the day for the first Base rate cut, each day that passes is one step closer, and it’s very much a ‘when’ rather than ‘if’ we see the first drop from 5.25%.”

Ed Phillips, CEO of Lomond, commented: “Having previously endured 14 consecutive base rate hikes since December 2021, it’s been a case of no news is good news for the nation’s homebuyers of late when it comes to the Bank of England’s decision on interest rates. That said, they can be forgiven for feeling a little disappointed that we didn’t see a cut materialise today, particularly given this week’s inflation figures.

Emily Williams, director of research at Savills, commented: “Although the base rate remained unchanged today, there are welcome indicators that should bring confidence to the housing market. This was the first meeting since September 2021 in which no members voted for a rate increase, which, coupled with the lowest rate of inflation for over two years, will give mortgage markets further confidence that the Bank will be in a position to cut the base rate in the coming months.

“This should provide a further boost to the housing market, which has already seen a stronger-than-expected start to the year. In the first eight weeks of the year, the number of sales agreed was up 31% compared to the same time last year, according to analysis of data from TwentyCI. Last week’s RICS survey also suggested growing confidence, with positive sentiment for both new buyer enquiries and new sales instructions for the second month in a row.”

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Will This Have A Big Effect on Mortgage Affordability?

The interest rate’s impact on the property market is often most keenly felt through the mortgage sector, which will also potentially have an effect on house prices. Affordable house prices and mortgage rates are among some of the most encouraging reasons to invest in a buy-to-let.

Speaking to the BBC, Polly Gilbert, who works specifically with first-time buyers and those facing affordability issues, said that mortgage lenders are currently very sensitive to market movements, and there are a lot of repricing of mortgage deals going on.

According to Gilbert, there won’t be a huge difference in monthly payments, but the country is in a “much better position on mortgage rates than we were six months ago”.

Matt Smith, Rightmove’s mortgage expert, said: “Mortgage rates have risen slightly over the last 6 weeks, but it does feel like the pressure on lenders to increase rates has dissipated, with some lenders having already cut rates in response to yesterday’s positive inflation news. This may mean that average mortgage rates start to fall back in the next couple of weeks. If this is the case it will be the first time average rates will have reduced in over a month.

“Homemovers shouldn’t expect to see a rush of rate cuts, but the two announcements this week should hopefully continue to give movers more confidence than they perhaps had at the start of last year. That’s certainly been the theme so far after the first quarter of the year – with more people enquiring to purchase homes, more sellers come to market, and more sales being agreed than this time last year.”

Further Reading: Take a look at our buy-to-let area guides, covering topics such as investment property available in Wembley and buy-to-let property in Harrogate.

Author

Jessica Ferris

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.