Bank of England hold on interest rates signals optimism for buyers and homeowners

With inflation continuing to fall, the Bank of England have today announced a decision to end almost two years of continued interest rate rises which will offer some optimism for house buyers and homeowners.

On Wednesday (20th September) inflation, the rate at which prices for goods and services increases, fell to 6.7% – a third consecutive month of decline. The Bank of England have been slowly increasing the base rate of inflation since November 2021, in an attempt to bring inflation under control.

The rate of inflation (sometimes referred to as the Bank Rate, or simply interest rate) determines the interest paid to commercial banks that hold money with the Bank of England. In turn, this influences the rates that banks charge people to borrow money or pay on their savings.

In August, this rate reached 5.25%, but as optimism among lenders that inflation would steadily reduce over the coming years increased, lenders started to slowly reduce fixed-rate mortgages.

The decision to hold the rate at 5.25% should signal more optimism for lenders, buyers and homeowners. While interest rates are expected to remain higher than during the 2010s, it should offer more stability to budget and plan with more confidence, helping people to take the next steps in their lives.

Our Chief Executive, John Anderson, said:

“While we all want inflation to reduce further, the decision by the Bank of England to hold interest rates provides some much-needed optimism for homeowners and buyers.

“As the medium to long-term outlook remains positive, we are seeing average fixed-rate mortgages slowly reduce. However, it looks unlikely that rates will fall back to the perhaps unusually low levels seen over the past decade and the market, buyers and people remortgaging are beginning to adjust to this ‘new normal’.

“With this confidence and stability, we are seeing people who had previously been holding off or putting their lives on pause start talking about taking their next steps and moving or buying a new home. We hope this confidence continues and urge people to talk to housebuilders about the various options that are available to help them get on the ladder or move home.

“While this news is pleasing, it only begins to solve part of the problem, and the government now needs to urgently resolve the broken planning system, particularly around the delays to Local Plans and Nutrient Neutrality to allow us to build the homes that all parties agree the country needs.”

Mortgage brokers and financial service providers also welcomed the news. Jason Blunden, from Evolve Financial Services, added:

“This is pleasing news and with the Federal Reserve holding their rates last night and the slightly lower inflation news yesterday this hold is very welcoming.

“Fixed rates have been reducing over the last few weeks to enable mortgage customers to have some reprieve on the costs of mortgages which again is great news to existing and new borrowers.

“The market may not return to the lows of the last decade, but providing repayments are budgeted for and are within customers’ affordability, this should provide more confidence and help make homeownership easier for many people.

“There are many different options available to people buying or remortgaging and we urge them to speak to an adviser to help them get the best option in place for their needs.”

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