Interest rates hold at 5.25% for fifth consecutive month – industry reaction

22nd March 2024

The Bank of England’s rate-setting body the Monetary Policy Committee (MPC) announced it has decided to keep interest rates on hold at 5.25% for the fifth time in a row.

The MPC voted by a majority of 8–1 to maintain Bank Rate at 5.25%. One member preferred to reduce Bank Rate by 0.25 percentage points, to 5%. The current rate is the highest for nearly 16 years.

David Cheadle, Chief Operating Officer at National Debtline, said “High interest rates are impacting more and more families each month, as mortgage payers come to the end of fixed rate deals meaning their monthly payments increase significantly.  Renters are also being impacted as higher costs are passed on by landlords.

“Despite this week’s welcome drop in inflation, the pressure on household budgets is set to continue and we can unfortunately expect many more to fall into arrears.

“Anyone struggling to keep up with mortgage repayments should reach out to your lender.  Lenders can do more to help than people often think, so it’s important to get in touch.  And anyone worried about their finances can always speak to an adviser at National Debtline, who can work through all the options available.”

Katie Pender, Managing Director at Target Group said “No surprises today as the Bank of England played safe and held the bank rate at 5.25% for the fifth consecutive month while it waits for inflation to drop further.  Borrowers will no doubt be pinning their hopes on cuts later in the year. In the meantime, it would be good to see some stability with mortgage rates themselves which are currently shifting at an almost unprecedented speed.  But, with a General Election on the cards and a potential change in Government, all is clearly not plain sailing. We will continue to work to support lenders and borrowers with the latest technology which is essential to speeding up decision-making and improving customer satisfaction.”

Paul Broadhead, Head of Mortgage and Housing Policy at the Building Society Association said “It was widely expected that the MPC would hold the Bank Rate at 5.25% but it now looks like it could cut in coming months. The anticipated cuts later in the year have already seen a reduction in mortgage rates, which has led to an improvement in consumer confidence in the housing market.

“This month fewer people said they are concerned about being able to pay their mortgage, with 90% saying they are confident that they can maintain their mortgage payments – an increase from 85% in December 2023.

“Although mortgage affordability remains the biggest barrier to buying a home, it is reassuring that this has fallen significantly over the past six months, from 71% in September 2023 to 62%.”

Sarah Coles, Head of Personal Finance at Hargreaves Lansdown said “If you were hoping that the Bank of England was going to cut rates, and solve a mortgage headache, then today’s news will be a major disappointment for anyone hoping to move or get a new loan. In fact, the mortgage market has been unwinding expectations of earlier rate cuts which it factored in at the start of the year, so deals are actually getting more expensive.

This isn’t going to last forever, and in the coming months we can expect mortgage rates to ease. It’s even possible the market will get over-excited by the fall inflation and cut faster. However, if you have a looming remortgage, you will still have a real battle to make ends meet. The HL Savings & Resilience Barometer shows that the average homeowning household with a mortgage has £353 left at the end of the month. A remortgage could easily swallow this whole, forcing them to cut back elsewhere significantly to hang onto their financial resilience.”

John Phillips, CEO of Spicerhaart and Just Mortgages, said “It’s a real shame that the MPC didn’t seize the opportunity to make the first long-awaited cut to base rate. That’s especially true given yesterday’s news and the positive trajectory of inflation. While the central bank does have to exercise caution to reach its 2% target, it’s critical it doesn’t stifle the economy by making a decision too late.

“A base rate cut today would have added some fantastic momentum to the confidence we have seen return back to the market and helped in some way to answer the affordability challenges many are still experiencing. Nonetheless, a fifth consecutive hold brings stability and along with yesterday’s inflation news, may reflect positively on swap rates – giving lenders the opportunity to reprice rates, even if only marginally.

“Without any Government intervention in the recent budget, or any movement in the base rate, brokers must continue to get the basics right, pound the pavement and offer that five-star service to continue nurturing this confidence and help answer this growing appetite to get moving plans back on track.”

Andy Mielczarek, Founder and CEO of SmartSave, a Chetwood Financial company, said “Any predictions that yesterday’s inflation announcement would precipitate a drop in the base rate were optimistic – the Bank of England has not bowed to pressure to cut rates in recent months, and it is likely to still be wary of a potential uptick in inflation thanks to tax cuts and minimum wage rising in the coming months.

“Interest rates will come down soon enough, with most experts anticipating a cut in June, or at the latest August. But this won’t mean blue skies all around. While higher interest rates remain a major issue for debtors and mortgage holders, the cost of living is still untenable for many households thanks to slowing wage growth and prices – especially for food – still rising.

“Now is not the time to reduce the base rate; the risk that inflation will rise again is still too great. For those in a position to do so, now is an opportune moment for consumers to take advantage of the available savings opportunities, as we should expect rates to fall as we move closer to the Bank’s eventual decision to cut the base rate.”

James Burgess, head of commercial and insolvency expert at Atradius UK, said. “The tide has finally started to turn on the cost-of-living crisis, as inflation surpasses ONS forecasts to drop to its lowest level in two and a half years. This will be hugely promising news for homeowners and buyers reliant on fixed-rate mortgages, who have been the hardest hit by rising costs and had been hoping for interest rates to fall.

“While we don’t expect the interest rate to fall until June, we should start to see a positive impact on fixed mortgage rates after today, as these are set based on interest rate outlook rather than today’s rate. If the interest and inflation rates do decrease as expected, we should see average two-year fixed-rate mortgages fall back below 5% by June.

“Construction businesses should feel the impact of this over the next few months, after a challenging 12 months where completion of new housing supply dropped due to supply chain challenges and reduced consumer demand. Firms are also navigating house price challenges, balancing the profitability of building projects with unstable house prices and varying consumer demand. Consumer demand needs to stabilise if we are to overcome these challenges. A stable interest rate will fuel a positive interest rates outlook today, very welcome for businesses in the sector, and likely to give much-needed boost to the housing market.”