On Thursday 3rd August, the Bank of England made a significant move by raising its key lending rate for the 14th consecutive time, this time by 0.25% to 5.25%. While this may not initially appear to be good news, experts had anticipated a possible increase of 0.5%, making the outcome better than expected.
As the market speculates about the future, one thing is certain: the impact on mortgage rates and the wider housing market has become a matter of keen interest. James Keable, Head of Capital Private Finance considers the implications of the rate hike and offers insights into the prospects for mortgage rates in the coming months.
The 14th consecutive rate hike
In a move that surprised some and validated predictions of others, the Bank of England raised its key lending rate for the 14th time in a row. The 0.25% increase brought the rate to 5.25%, an adjustment that could signal an inflection point in the economy's monetary policy. Although many expected the increase to be higher, the mere fact that the central bank is taking measured steps towards normalisation provides some relief to the market.
The quest for stability
As the rate hike streak continues, there is an emerging sense of stabilisation in the economy. Although some analysts speculate that there might be room for another 0.25%/0.5% increase, the prevailing sentiment is that the Bank of England will not rush to raise rates further. However, this does not necessarily mean that SWAPS rates, which significantly influence mortgage rates, will follow the same trajectory. Already, there are indications of a downward trend in SWAPS rates following the July inflation figures, offering a glimmer of hope for potential homebuyers and existing homeowners considering re-mortgaging. It will be interesting whether this will change following the August numbers.
A positive outlook for mortgage rates
The recent reductions in inflation figures, which surpassed expectations in July, but fell short slightly of predictions in August have had a mainly positive impact on the mortgage market so far. Many major high street lenders have been gradually reducing their rates in response to the more favourable inflation data, although it remains to be seen what impact the latest figures have on these.
Anticipation for the future
Investors, homeowners, and prospective buyers alike will be closely monitoring mortgage rates over the coming weeks to see which direction we will be traveling next and how quickly. If the data reveals further improvements, it could provide an impetus for high street lenders to continue lowering mortgage rates, bolstering the housing market even further.
Keeping all this in mind, let’s hope the housing market sees continued positive trends and increased stability.
Head of Capital Private Finance