Interest rates remain at 4.25% – consumer credit reaction

The Bank of England Monetary Policy Committee (MPC) has voted to hold interest rates at 4.25%. The Bank of England has held interest rates at 4.25%. The Monetary Policy Committee (MPC) voted 6:3 for the hold, with three members voting for a cut.

Commenting on the latest decision, John Phillips, CEO of Just Mortgages and Spicerhaart, said “The decision to hold interest rates is not unexpected and is certainly in line with the bank’s careful and gradual approach. Yesterday’s news on inflation wouldn’t have been enough to sway them, especially with current geopolitical tensions and in light of further escalation in the Middle East and the potential ramifications this could have on prices and global trade.

“While the changing narrative around interest rate expectations and the number of cuts isn’t entirely helpful and goes some way to unsettle borrowers, we can take comfort that the consensus is still that interest rates will be cut. While careful and gradual is fine to a point – especially given the bigger picture at play – an economy on life support requires some clear action and hopefully that will mean more than one cut later in the year. It will improve affordability, drive homeownership and deliver economic growth.

“In the meantime, the message to potential borrowers is that right now, lenders are willing to lend, options are available to support all buyers and brokers stand ready to help them navigate the market. We’ve been encouraged by demand across both EA and financial services businesses, but know there are still plenty with the appetite to buy, but just need that extra support.”

Simon Webb, Managing Director of capital markets and finance at LiveMore, said “The Bank’s decision to hold interest rates today is a sensible move considering current inflation levels and ongoing geopolitical uncertainty. While borrowers may be eager to see further cuts, today’s hold helps to reinforce market stability and gives lenders and intermediaries the space to plan with greater confidence.

“For the later life lending market, this consistency is welcome. After a period of significant economic volatility, a steady rate environment allows brokers to have more informed conversations with clients about their long-term financial plans.

“We remain optimistic about the outlook for later life lending. With demand growing and awareness increasing, there are real opportunities to support older borrowers with tailored, flexible solutions — particularly as the market prepares for the potential of further rate cuts later in the year.”

Susannah Streeter, Head of money and Markets, Hargreaves Lansdown said “Policymakers are in a stalemate. Growth has seized up, but inflation has stayed stubbornly sticky. Trade deals have cleared some economic clouds, but conflict in the Middle East threatens further turmoil. Energy prices looked like they were on their way down, but are now ramping back up. The labour market has shown signs of easing but not enough to erase worries about hot wage growth.

“In every direction, there’s a conundrum to confront, so policymakers have judged that pressing the pause button on rates is the best option for now. Given the unpredictable winds whistling through the world, global growth is set to slow, keeping activity in the UK highly sluggish. The economy will need a shove to get moving again, and so two interest rate cuts are still on the horizon this year. Hopes for a summer rate reduction haven’t completely faded, with bets ramping up that a cut in August could provide the rays of relief that borrowers have been waiting for.’’

Sarah Coles, Head of Personal Finance at  Hargreaves Lansdown said “You only have to look at recent moves in the mortgage market to see how tough the banks are finding it to price their deals right now. Recently we’ve seen some banks cut rates, some increase them, and some do a combination of both.

“You’d be forgiven for thinking that the Bank of England holding rates might bring some stability, but while that’s true for tracker rates, fixed rate deals are another matter entirely. They’re facing a strange combination of factors, with expected rate cuts pointing to a future of lower rates, and rising bond yields raising the cost of fixed deals and pushing rates up. Neither of these things look set to change in a hurry, so we may need to get used to uncertainty for a while.

“At times like this, we’ll get some low rates in the mix every so often, so it will be key to snap up opportunities as soon as they appear. The HL Savings & Resilience Barometer found that those who have remortgaged since rates started climbing at the end of 2022 pay £157 a month more for their mortgage, so it’s worth doing what you can to keep the rise in your monthly payments to a minimum.”