Interest rates held again: estate agents react
Interest rates were held for the sixth consecutive Monetary Policy Committee (MPC) meeting yesterday, as estate agents expressed hope of a cut in the coming months.
It comes as inflation hit the Bank of England’s 2% target this week.
The MPC voted by a majority of 7–2 to maintain the base rate at 5.25%.
Two members preferred to reduce the bank rate by 0.25 percentage points, to 5%.
Policymakers said monetary policy has to remain restrictive for an extended period of time until the risk of inflation becoming embedded above the 2% target dissipates.
Agents are now hoping an interest rate cut will arrive to boost the property market around August or September.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said:
“Although a cut to base rate would give some added impetus to the housing market following the uncertainty which the election announcement inevitably brought, no change was expected.
“Inflation is thankfully falling but it is early days as pressures remain in wage growth and the services sector in particular.
“Hopefully, lenders will sense that a drop in base rate is coming sooner rather than later and begin reducing their mortgage rates, however marginally, in anticipation which will certainly improve confidence.”
Amy Reynolds, head of sales at Richmond estate agency Antony Roberts, said a pause is “far better than ever-rising rates”, a rate reduction is needed to stimulate activity in the property market.
Reynolds went on to say:
“Buyers are having to be more price-conscious and sellers increasingly realistic about their pricing.
“Now that the inflation target has been met, it is time for the Bank to act.
“If the election result provides a clear direction, we anticipate a surge in market activity as delayed transactions are completed.
“We are cautiously optimistic for the second half of the year – confidence in the market is likely to rebound, potentially leading to a stronger performance, and a rate cut would assist with an autumn bounce.”
Iain McKenzie, chief executive of The Guild of Property Professionals, said:
“In light of the Bank of England’s decision to keep interest rates unchanged, it’s clear that while inflationary pressure is easing, there are still other factors at play that influenced this choice.
“Although buyers and sellers will have to wait a little longer to see an interest rate cut, the property market continues to see steady recovery as buyer demand, transactions levels and prices show growth.
“When it does happen, a rate cut will bring mortgage rates down, providing much-needed relief while boosting market confidence further.
“There is widespread expectation for the base rate to be cut imminently, with economists from Capital Economics forecasting a reduction to 4.5% by the end of 2024.
“This optimistic economic outlook has propelled consumer confidence in May to its highest level since December 2021.”
McKenzie said the recent economic stability has reassured homeowners about their mortgage affordability, and they stand to benefit from the expected rate cuts.
McKenzie added:
“While all eyes will be focused on the upcoming election and potential impact it will have on the property market, experts suggest that its effect will be minimal, and it is not expected to disrupt the usual seasonal transaction patterns.
“It is highly likely that the first interest rate drop will have more of an impact on market activity than the upcoming election.”
Nathan Emerson, chief executive of Propertymark, added:
“For the housing market it is vital there is further confidence regarding the long-term trajectory of inflation, and this is a stance the Bank of England has remained very open about before any commitment is made to start reducing the base rate.
“Propertymark remain keen to see rates reduced when circumstances allow and for this to then translate into competitive mortgage deals from lenders at the first opportunity.
“We have seen a much-needed progress since the start of the year regarding the housing market and it is vital that stability is maintained.”
Kindly shared by Estate Agent Today
