Interest rates remain at 5.25% – consumer credit industry reaction

10th May 2024

The Bank of England has opted to hold the base rate at 5.25%, this marks the sixth consecutive meeting where the Monetary Policy Committee has opted against raising or cutting interest rates.

Commenting on the announcement, Steve Vaid, Chief Executive at the Money Advice Trust said “High interest rates have already added to the pressure many homeowners are under as they grapple with significantly steeper mortgage repayments.  

“For the thousands of mortgage holders coming to the end of fixed rate deals this year, the pain is still to come. I would urge anyone struggling to get in touch with their lender who can offer support, more than many people may think.”  

Paul Broadhead, Head of Mortgage and Housing Policy at the BSA said “With inflationary pressures continuing, it is no surprise that the Bank Rate has been held at 5.25%.

“We still anticipate that the MPC will cut rates later this year, and although mortgage rates have ticked up slightly in recent weeks, they remain lower than they were this time last year.

“However, those coming to the end of a fixed-rate mortgage that was agreed before the Bank Rate started to rise in December 2021, will need to prepare for a significant increase in their mortgage payments. Anyone who is concerned that they may experience financial difficulties in the coming months, should contact their lender as soon as possible, preferably before missing any payments. They have a range of practical, tailored support available to anyone who may be struggling.”

Sebrina McCullough, Director of External Relations at Money Wellness said “Today’s decision to hold interest rates will be a blow to homeowners holding out hope that their repayments would start to fall.

“We’ve already seen a 25% rise in mortgage arrears this year. Embattled homeowners are struggling to keep on top of mortgage payments that have increased from 24% to 45% of net take-home pay since December 2022.

“Despite green shoots, the cost-of-living crisis is far from over. Household budgets remain stretched, with expenses at historical highs. This is not going to improve any time soon – we expect to see continued growth in homeowners seeking debt support well into 2025.

“Homeowners coming off fixed rates deals this year who think they might struggle with increased payments should seek support from their providers as soon as possible. There is help available.”

Ben Allkins, Head of Mortgages and Protection at Just Mortgages, said “It’s hard not to see today’s decision as a missed opportunity, especially as inflation continues to head in the right direction. I know the central bank has many factors to consider and often follows the lead of the Fed and ECB, but further delays keep the economy fighting for life and risk derailing all the positive momentum we have seen in the mortgage market so far this year.

“Just recently, we have seen the impact of the changing expectations and a higher for longer mentality, with swap rates rising and lenders following suit across their product ranges. Even so, we’ve been encouraged by the high demand we have seen for valuations and appointments, demonstrating the growing confidence among clients. However, further delays make the job much harder for brokers to nurture and sustain this confidence. Thankfully, they are well placed to help clients navigate the market and identify the opportunities still available to make their plans a reality. It’s up to brokers to keep sharing this message and offering that five-star service.

“We have to hope that the Bank of England finally finds the confidence to pull the trigger on a base rate cut sooner rather than later.”

Paul Heywood, Chief Data & Analytics Officer at Equifax said “Despite progress on inflation, the Bank remains cautious. Consumers and lenders alike have now had nine months at the current base rate, and the realities of high borrowing costs are beginning to bite.

“Although mortgage approvals ticked up in March, arrears kept rising in the same month1, marking the 14th increase in the past 15 months. Average mortgage repayment growth plateaued earlier in the year, but those hoping to jump on the housing ladder should expect high rates until at least September when markets predict the Bank’s first rate cut in over a year.

“This will leave many households weathering high borrowing costs for the foreseeable future. Consumers must not suffer in silence. Equifax will continue to work alongside its lending partners to ensure consumers understand their creditworthiness and affordability.”

Alastair Douglas, CEO of TotallyMoney said “Today’s figures show a drop in consumer confidence for the first time in seven months — as people are growing increasingly concerned about their household finances, job security and business activity.

“We need to see a better show of leadership from the Bank of England, along with an indication of the impact their monetary policy is having on the economy, and clear direction of what we should expect for rates.

“Over the past two years, the Bank has struggled with its forecasting, predicting a year-long recession, and not factoring the impact of wage rises on inflation. Some think it was slow to increase rates, and the worry now is it’s taking too long to cut them.

“Now more than ever, we need stability, but continued uncertainty is continuing to impact people’s lives. As thousands of low rate mortgages come to an end each day, banks are increasing the cost of new deals, and customers are unsure whether they should fix a new offer, sit on a tracker, or gamble on the SVR in the hope of a brighter future.”

Sarah Coles, Head of Personal Finance at Hargreaves Lansdown said “It’s as much of a surprise as a Bank Holiday washout followed by a mid-week heatwave, so the decision to hold rates steady for another month won’t move the market. It’s the commentary that the everyone will be pouring over.

“There were indications that rate cuts may not be as distant as some mortgage holders were fearing. The Bank played down inflationary risks, and drew out the growing signs of weaknesses in the economy – both of which point to the likelihood of a cut this summer. It remains to be seen whether this brings market expectations forward. If so, it could mean better news in the mortgage market.

“This will be music to the ears of remortgagers, who have endured some horrible hikes in recent weeks. Moneyfacts figures show the average 2-year fixed rate mortgage rose from 5.56% at the end of January to 5.93% today. We can’t expect seismic shifts, but there’s likely to be some movement in the direction of 5%, as the market adjusts. It’s also a relief for anyone who shifted to a variable rate deal, many who would have been expecting a spring cut at the point when they made the decision. This is likely to come as particularly good news to the one in four people which the HL Savings & Resilience Barometer shows could be at risk of mortgage arrears by the end of 2024.”