The decision to keep interest rates on hold is not the early Christmas present that borrowers would have wanted – but it may bring savers some relief, experts have said.
The Bank of England kept the base rate on hold at 4.75% on Thursday, following two reductions earlier this year.
One expert suggested that, in the absence of regular base rate cuts, mortgage rates are likely to “yo-yo” in the months ahead.
The base rate was kept on hold amid a backdrop of sticky inflation and economic uncertainty.
Figures released on Wednesday showed Consumer Prices Index (CPI) inflation rose to 2.6% last month, marking its highest level since March and the second monthly increase.
Matt Smith, a mortgage expert at Rightmove, said: “While not the early Christmas present that many would have wanted, it was widely anticipated, and must be considered against a backdrop of inflation being at the top end of forecasts, and wages have increased at a higher rate than expected.
“We don’t expect any reductions in mortgage rates over the next few weeks, but as we progress into 2025, lenders are likely to look at ways to take advantage of increased demand as the busier home buying season starts.”
Nick Leeming, chairman of estate agent Jackson-Stops, said: “The Bank’s decision to hold rates steady provides a degree of stability, which is crucial for both the economy and the property market.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “While it is no surprise that the Bank of England maintained interest rates at 4.75% given the recent rise in inflation, borrowers will still be disappointed.
“The trend in new mortgage pricing is downwards but mortgage rates are likely to continue to yo-yo over the next three months. Swaps (which are used by lenders to price mortgages) have been gradually falling for a month but all those falls have been wiped out over the past three days.
“It is only when we start getting regular base rate cuts that the market will react favourably and swap rates will fall.
“Until then swaps will continue to fluctuate as much as we have seen over the past 12 months, which makes it harder for lenders to consistently offer lower mortgage rates.”
He suggested that borrowers looking to remortgage should plan ahead as much as possible, speaking to a broker ideally six to seven months before their current deal ends.
According to figures from UK Finance, around 1.8 million fixed-rate mortgages are due to end in 2025.
Paul Broadhead, head of mortgage and housing policy at the Building Societies Association (BSA), said: “Anyone who is concerned that they may experience financial difficulties in the coming months should contact their lender as soon as possible, preferably before missing any payments.
“Lenders have a range of practical, tailored support available to anyone who may be struggling.”
Stamp duty discounts are also set to become less generous next year. First-time buyers in England and Northern Ireland will see the “nil rate” band shrink from its current temporary level of £425,000 to £300,000 from April.
Laith Khalaf, head of investment analysis at AJ Bell, said: “Mortgage borrowers face a more extended period before they can look forward to substantially lower debt costs as a result of base rate staying higher for longer.
“Combined with higher taxes and rising prices, that spells a more constrained consumer, which puts additional downward pressure on economic growth and corporate profitability.”
Holly Tomlinson, a financial planner at wealth manager Quilter, said: “For savers and some investors, the hold offers stability for now.”
She added: “The continued high rates are a win for savers, with attractive returns still available on savings accounts and cash Isas.
“However, with rate cuts likely next year, locking in a fixed-rate account now could protect your money from the impact of falling interest rates. If you haven’t reviewed your savings recently, now is a good time to shop around for competitive deals.”
Rachel Springall, a finance expert at Moneyfactscompare.co.uk, said: “It will be interesting to see how hard savers are hit next year, as several base rate cuts are anticipated if inflation is kept under control.
“Not only this, but as tax-free allowances and income tax thresholds are frozen, some savers may breach their personal savings allowance (PSA) and flock to cash Isas to protect their savings interest from tax.”
