The Bank of England’s Monetary Policy Committee this morning decided to keep interest rates on hold at 5%, a move that was anticipated by most economist over the past few weeks.
The MPC voted 8-1 to keep rates static, commenting that: “Since the MPC’s previous meeting, global activity growth has continued at a steady pace, although some data outturns suggest greater uncertainty around the near-term outlook.
“Oil prices have fallen back, reflecting in large part weaker demand.”
The committee adds that it expects UK economic growth of 0.3% in the third quarter of this year, “marginally weaker” than the 0.4% rate forecast in its August report but adds this is “broadly in line with estimates”.
On mortgages, the body says: “The share of two-year fixed-rate mortgages within new secured household lending had been increasing since the first quarter of 2023, despite rates on these mortgages being above five-year fixed rates over this period.
“That had reversed the previous trend whereby longer-duration mortgage fixes had increased in popularity since 2016, probably reflecting household expectations of lower interest rates.
“Slow mortgage stock turnover meant that the share of five-year fixed-rate mortgages in outstanding lending had remained historically high.”
Deutsche Bank chief UK economist Sanjay Raja adds: “We maintain our call for one more rate cut this year. We see Bank rate falling to 4.75% by year end.
“Thereafter, we continue to see four quarter point rate cuts through 2025, followed by a further three more rate cuts in 2026, taking Bank rate to 3%.”
Legal & General Mortgage Services managing director Kevin Roberts says: “Today’s base rate decision is a continuation of the thoughtful approach we have seen from the Bank of England this year.
“However, the mortgage market remains primed for a strong final quarter. We are seeing the return of sub-4% mortgage products for the first time since April, and supply is increasing, with the average number of available homes per estate agent at its highest since 2014.”
Rightmove mortgage expert Matt Smith adds: “We’re still expecting two rate cuts before the end of the year, and home-movers should continue to see a downward trend in mortgage rates this side of Christmas.
“I think overall, there’s likely to be quite a moderate response from lenders in response to today’s news – and while rates should continue to come down, mortgage lenders’ funding costs are unlikely to come down significantly, which wouldn’t leave heaps of room for dramatic mortgage rate cuts.”
