The Bank of England held the Base Rate at 3.75% today with the Monetary Policy Committee voting unanimously to keep rates unchanged as rising energy prices and geopolitical tensions cloud the inflation outlook – a move lenders say will keep funding costs volatile across specialist and bridging markets.
The MPC said the conflict in the Middle East had pushed up global energy and commodity prices and warned inflation would rise in the near term, adding it would “continue to monitor closely the situation in the Middle East and its impact on global energy supply and energy prices” and stands ready to act to keep inflation on track for its 2% target.
WIDELY EXPECTED
Theo Chatha, CFO and MD of Specialist Finance at Bibby Financial Services, says the decision had been widely expected but the outlook had shifted rapidly.
“Today’s interest rate hold will surprise no one watching the markets – but just weeks ago, a cut felt all but certain… oil prices spiked, trade routes tightened, and sterling weakened sharply,” he says, adding that “trying to predict what comes next right now is a losing game.”
INFLATION CONCERNS
Adrian Moloney, group lending distribution director at OSB Group, says the hold reflected ongoing inflation concerns.
“While some borrowers may have been hoping for the first rate cut of the year, a decision to hold reflects ongoing uncertainty in the inflation outlook… and provides a degree of stability that has been largely absent over the past couple of years,” he says.
And Charles Resnick, chief finance officer at Afin Bank, says the next move on rates is now even harder to call.
“Today’s decision to hold interest rates was no surprise given soaring energy prices… however, timing for the next cut is now more uncertain and will depend on how long the price shock lasts.”
FUNDING IMPACT
Lenders say the impact is already being felt in funding markets. Steve Cox, chief commercial officer at Fleet Mortgages, warns: “We’ve seen something of a concertina effect in recent weeks, with product withdrawals and rates edging up as lenders have needed to respond to the sharp movements in funding costs… it’s been clear that no lender is immune from this.”
However, Ryan Etchells, chief commercial officer at Together, says the hold removes hopes of near-term relief for borrowers.
“Holding the base rate may not be as bad as feared… but for mortgage borrowers, there’s little relief,” he says, adding that rising oil prices meant the Bank “had few options… by sticking with a higher base rate.”
HIGHER RATE ENVIRONMENT
Daniel Austin, CEO and co-founder at ASK Partners, says that the decision reinforces a prolonged higher-rate environment.
“The Bank of England’s decision to hold rates at 3.75% reinforces the ‘higher for longer’ reality… leaving confidence fragile among buyers and developers alike,” he says, noting that capital is likely to favour “income-led sectors such as build-to-rent, co-living, logistics, storage and data centres.”
Jinesh Vohra, CEO of Sprive, says markets have reacted quickly to global events.
“Geopolitical tensions and market volatility are clearly feeding through into mortgage pricing… lenders are reacting quickly by repricing deals and pulling their most competitive products,” he says, adding that the typical mortgage is now hundreds of pounds more expensive than before the Iran conflict began.
UNDER PRESSURE
Madhusudan Kejriwal, CEO at TransUnion, says households will continue to feel the pressure.
“With energy prices still volatile due to the current geopolitical climate, there is a short-term inflation risk… the overall cost of living will remain a point of concern for many households.”
And Joe Pepper, CEO of PEXA UK, warns that the knock-on effects for the property and lending pipeline could be severe.
“We have already seen UK lenders collectively pull hundreds of mortgage products… pipelines will freeze, chains collapse, and resource planning becomes almost impossible,” he warns.
