By using this website, you agree to our use of cookies to enhance your experience.
Graham Awards


Agents react to Bank of England interest rate decision

The Bank of England has raised base rate by 0.25 per cent to 4.25 per cent - the highest level since 2008. 

However, the Bank has also moderated its economic forecast for 2023 and no longer believes there will be a recession.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: "There is a close call between change and no change – this latest rise in rates is a huge disappointment for the housing market as we were hoping the Bank would trust in its own data and leave well alone. Activity is slowly beginning to pick up after a very quiet last quarter of 2022 and the housing market is so important to overall economic prosperity. Of course, it is important to reduce inflation as far as possible in view of its impact on buyer confidence to take on debt. Overall, the economy still feels fairly weak as real incomes are falling so we would have liked to have seen at least one month without a rate rise."


Tom Bill, head of UK residential research at Knight Frank, states: “There has been upwards, downwards and sideways pressure on mortgage rates in recent weeks as lenders digest a spike in inflation, a slump in sales volumes and a larger dose of caution in swap markets following the collapse of Silicon Valley Bank. The good news is that any movements in borrowing costs pale into insignificance compared to the period following the mini-Budget and the overall picture is one of stability. Today’s decision is unlikely to dampen demand in the housing market, which has proved more solid than expected so far this year against an improving economic backdrop. We expect prices will fall by a few percent in 2023 as more homeowners transfer to higher fixed-rate deals and supply rises from the lows of the pandemic.”

Nick Leeming, chairman of Jackson-Stops, sees it this way: “Hot off the heels from a surprise rise in inflation for February, the latest decisive action in a marathon of measures by the Bank of England to bring inflation down by the end of the year should have the long-term effect of calming the markets. This could, however, be a fly in the ointment for housing, as mortgage borrowers watch intently to understand the effect this may have on current deals. In the medium term, as with an ever-evolving economic picture, if inflation is successfully scaled back, the overall lending market may paint a more favourable picture for borrowers with further stability on the horizon. 

“Home ownership continues to sit at the top of the table for savers looking to beat inflation and make their money work harder for them. No cash savings rates currently available can beat inflation. By comparison from January 2022 to January 2023, the average UK house price rose by £17,000, showing just how reliable longer term capital growth in our bricks and mortar can be. Even with the average monthly mortgage payment being £733, homeowners could have made an average profit of £8,156.”

And Dominic Agace, chief executive of the Winkworth franchise chain, comments: "We are now near the peak of the tightening cycle and with a strong appetite from lenders remaining, mortgages now appear to have settled in for the long term at around four per cent. At this level, with a strong employment market and improving economic sentiment, we see a more benign year ahead than expected, with prices drifting down on average by five per cent, as affordability feeds through differently in different areas, increasing price performance disparity driven by location but with a soft landing in sight."

This week's BoE decision was clear-cut with seven of the nine members of the Monetary Policy Committee voting for the increase.

The minutes revealed that the Bank is now more optimistic about the economy, notwithstanding today's move, and it expects national income to grow slightly in the second quarter of the year rather than shrinking by 0.4 per cent as it suggested just a month ago.

The change would mean that the UK would no longer face a technical recession, defined as two successive quarters of economic contraction.


Please login to comment

MovePal MovePal MovePal
sign up