The Bank of England has held Bank Rate at 3.75%, reinforcing a “wait and see” approach as inflationary pressure builds from rising energy costs linked to conflict in the Middle East.
The eight to one decision by the Bank’s Monetary Policy Committee does little to remove uncertainty but it does reinforce the conditions that continue to drive short-term lending demand.
With inflation now at 3.3% and swap rates remaining volatile, lenders are still repricing frequently, creating a moving target for borrowers trying to secure long-term finance.
In this environment, bridging is increasingly being used as a tool to navigate delays, hold assets and buy time while markets stabilise.
SIGH OF RELIEF
Ben Nichols (main picture, inset), managing director at RAW Capital Partners, says: “There was some talk of a rate hike ahead of today’s decision, so the market will be breathing a small sigh of relief that it has held steady for now.
“The conflict in the Middle East has clearly added some upwards pressure.”
“The conflict in the Middle East has clearly added some upwards pressure to the inflation outlook, particularly around energy costs, but growth has to remain part of the conversation too. On that front, after a challenging few years, it’s encouraging to see the Bank avoid adding further pressure to the economy.
“For the property market, it also gives brokers and borrowers a bit more certainty in the short term. We’ve already seen some lenders start to reduce rates after initially pricing in more risk and, hopefully, today’s decision supports that trend and gives brokers and borrowers more confidence to move ahead with their plans.
“That said, the speed at which rates have risen since the start of the conflict has naturally affected sentiment, so lenders need to keep providing clarity and flexibility, while listening closely to the challenges brokers are seeing on the ground.”
SHIFTING EXPECTATIONS
While Bank Rate has held, forward pricing expectations continue to shift – impacting exits, refinancing strategies and deal viability.
Steve Cox, Chief Commercial Officer at Fleet Mortgages, says: “Today’s decision to hold Bank Base Rate at 3.75% underlines just how difficult the current environment is for the MPC. In most cycles, it’s possible to get a fairly clear sense of the likely direction of travel ahead of the announcement, but this time it has been far less predictable.
“That reflects the complexity of the situation, particularly given the geopolitical risks we’ve seen emerge since March and the challenge of trying to future-proof policy against those uncertainties. With the announcement last week that inflation has risen to 3.3%, and expectations that it could move higher in the months ahead, it’s understandable the Bank has continued to wait and assess.
“In the buy-to-let market, we have seen some welcome stability return to product pricing in recent weeks, but it would be unwise to assume this will continue uninterrupted. Swap rates remain volatile and are highly sensitive to wider economic and political developments, which makes consistent pricing difficult for lenders.
“Advisers and landlord clients therefore need to remain alert to changes and be ready to act when opportunities arise, particularly in a market where conditions can shift quickly.”
AFFORDABILITY PRESSURES
Adrian Moloney, group lending distribution director at OSB Group, adds: “The Bank of England’s decision to hold interest rates was widely expected and reflects just how finely balanced the outlook remains.
“Inflation has increased in recent months, driven in part by rising energy costs, which reinforce the challenge policymakers face in bringing it back to target sustainably.
“Although a hold brings a degree of short-term stability, it doesn’t remove the uncertainty facing borrowers and brokers.
“Expectations around the future path of rates continue to shift, and it is this volatility, rather than the level of rates alone, that is shaping behaviour across the market.
“Affordability pressures remain firmly in place, particularly for those coming off fixed-rate deals.
“In the rental market, landlords are still absorbing the cumulative impact of higher borrowing costs, which continues to influence rents and supply.
“Against this backdrop, the value of professional advice becomes even clearer, helping borrowers navigate a market that is holding steady for now, but far from settled.”
