Agents react to Bank of England interest rate decision

The Bank of England has raised base rate by 0.25 per cent to 4.25 per cent - the highest level since 2008. 

However, the Bank has also moderated its economic forecast for 2023 and no longer believes there will be a recession.

Tom Bill, head of UK residential research at Knight Frank, states: “There has been upwards, downwards and sideways pressure on mortgage rates in recent weeks as lenders digest a spike in inflation, a slump in sales volumes and a larger dose of caution in swap markets following the collapse of Silicon Valley Bank. The good news is that any movements in borrowing costs pale into insignificance compared to the period following the mini-Budget and the overall picture is one of stability. Today’s decision is unlikely to dampen demand in the housing market, which has proved more solid than expected so far this year against an improving economic backdrop. We expect prices will fall by a few percent in 2023 as more homeowners transfer to higher fixed-rate deals and supply rises from the lows of the pandemic.”

Nick Leeming, chairman of Jackson-Stops, sees it this way: “Hot off the heels from a surprise rise in inflation for February, the latest decisive action in a marathon of measures by the Bank of England to bring inflation down by the end of the year should have the long-term effect of calming the markets. This could, however, be a fly in the ointment for housing, as mortgage borrowers watch intently to understand the effect this may have on current deals. In the medium term, as with an ever-evolving economic picture, if inflation is successfully scaled back, the overall lending market may paint a more favourable picture for borrowers with further stability on the horizon. 

“Home ownership continues to sit at the top of the table for savers looking to beat inflation and make their money work harder for them. No cash savings rates currently available can beat inflation. By comparison from January 2022 to January 2023, the average UK house price rose by £17,000, showing just how reliable longer term capital growth in our bricks and mortar can be. Even with the average monthly mortgage payment being £733, homeowners could have made an average profit of £8,156.”

And Dominic Agace, chief executive of the Winkworth franchise chain, comments: "We are now near the peak of the tightening cycle and with a strong appetite from lenders remaining, mortgages now appear to have settled in for the long term at around four per cent. At this level, with a strong employment market and improving economic sentiment, we see a more benign year ahead than expected, with prices drifting down on average by five per cent, as affordability feeds through differently in different areas, increasing price performance disparity driven by location but with a soft landing in sight."