The Bank of England has announced its interest rate decision.
The rate remains at 4.25%.
It was cut to that rate last month when the Bank’s Monetary Policy Committee (MPC) hinted at further reductions in the near future.
But analysts now suggest those cuts will not arrive until later in the year, as inflation remains significantly above target.
A spokesperson for agency group LRG says: “Today’s decision is a sign of prudence rather than of pessimism. The economy started the year with some momentum, but underlying activity remains fragile. Businesses are still absorbing higher employment costs, and global challenges such tensions in the Middle East (potentially inflating oil prices) are feeding into a more cautious approach.
“I do not expect the property market to be negatively impacted by today’s decision. Mortgage rates are in the 4% range, with ‘best buys’ starting with a 3, which, in historical terms, is healthy. Lending criteria is beginning to loosen on affordability and we are seeing increased appetite from lenders. Perhaps most importantly, stock levels are approximately 12% higher than this time last year, compared to buyer demand, up by 3%. This combination creates significant opportunity – for buyers and sellers.”
Nick Leeming, chairman of Jackson-Stops, comments: “Holding rates today reflects the air of uncertainty that has entered the UK economy. A combination of geopolitical tensions, as well as continuing inflationary pressures at home, has resulted in any rate reductions being deferred until later in the year.
“The economy, while not in unchartered territory, is having to adjust in real time to manage inflation and reassure consumers. For the property market, today’s decision to hold rates will not immediately effect mortgage rates on the market but it may cause slight hesitancy to enter into the buying process.
“Committed buyers will not be knocked off course by the Bank of England’s actions today, the market remains in a robust position with completions able to take place. Further proof of the market’s resilience is being seen across the Jackson-Stops network with a notable uptick in new listings in May compared to two years ago. High volumes of buyers and sellers are willing to press on and take their next step irrespective of wider economic headwinds.”
And Jeremy Leaf, north London estate agent and a former RICS residential chairman, adds: “With inflation and wage growth stubbornly high while concerns about the economy here and abroad remain, the Bank of England clearly found it unsafe to reduce base rate.
“The inevitability of the no change decision will have a limited impact on an already fairly subdued housing market as it has already been largely factored in by buyers and sellers.
“However, relaxed lender stress testing is improving affordability and having a positive knock-on effect on activity, particularly for first-time buyers.”
