The Bank of England has maintained interest rates at 3.75% following a divided vote by its Monetary Policy Committee (MPC). Six members voted to keep the Bank Rate unchanged, while three members advocated for a 0.25 percentage point increase to 4%.
The MPC noted that energy prices have remained volatile and higher than pre-conflict levels due to events in the Middle East, leading to uncertainty about the impact on the UK economy. CPI inflation has fallen to 2.6% since the previous meeting but is anticipated to rise later in the year as higher energy prices continue to affect the economy.
Samuel Fuller, director at Financial Markets Online, observed that the Bank's minutes suggest a more hawkish stance, moving from 'watch and wait' to 'watch and wait with a big stick'. Nathan Emerson, CEO at Propertymark, stated that holding interest rates provides greater certainty for the housing market, potentially allowing lenders to offer competitive mortgage products.
Colleen Babcock, a property expert at Rightmove, highlighted that average mortgage rates have increased in recent weeks due to geopolitical tensions, with the average two-year fixed rate currently at 5.11%. This is up from 4.25% before the war in Iran began, but down from a peak of around 5.43% in April.