The Bank of England has announced it will keep interest rates on hold at 3.75%. This decision marks the fifth consecutive meeting without a change in the Bank Rate.
Despite the hold, the prospect of renewed rate increases is introducing fresh uncertainty into the housing and mortgage markets. Policymakers are addressing renewed inflationary pressures and the potential for another energy price shock.
UK inflation reached 3.1% in August, remaining above the Bank's 2% target. Financial markets have increasingly adjusted their expectations towards higher borrowing costs.
The changing outlook could have notable implications for mortgage affordability and confidence in the housing market. This particularly affects borrowers nearing the end of fixed-rate deals and potential buyers assessing their affordability.
Amy Reynolds, head of sales at Antony Roberts, noted that mortgage rates have already been rising this week, suggesting the market is no longer anticipating quick cuts. Richard Merrett, managing director of Alexander Hall, stated that the base rate is one factor in affordability, but lenders' criteria have improved, offering more options for first-time buyers.