The Bank of England (BOE) Base Rate Update: 21st March

The Bank of England’s Monetary Policy Committee (MPC) met today to review their fight against inflation and adjust the base rate accordingly.

The MPC voted by majority decision to maintain the Bank of England’s base rate at 5.25% with 8 votes to 1. One committee member intended to reduce the rate by 0.25 to 5%.

The announcement coincides with a drop in inflation to 3.4%, following a persistent period at 4% from December through January. The MPC wants to bring inflation down to 2% by the end of the year. Once inflation reaches this target, the committee intends to maintain the base rate at an elevated level until stability is achieved, recognising the risk of inflation resurgence.

How does the base rate work?

The MPC adjusts the Bank of England’s base rate in response to inflation to manage economic stability.

When inflation rises, the MPC increases the base rate to curb spending and borrowing, and reduce inflationary pressures. If inflation is low, the base rate lowers to encourage spending and borrowing, supporting economic growth.

What this update means for your mortgage…

The MPC has opted to maintain the current interest rate rather than making any changes. Typically, this decision leads to a stabilisation of mortgage deals, but competition can still influence fluctuations, driving rates either up or down.

Unfortunately, the current level of lender competition is causing instability in mortgage rates.

Lenders are engaged in fierce competition, constantly introducing and withdrawing deals on short notice. Recent reports from the BBC suggest that mortgage deals are being pulled within a mere 15 days of their initial posting, despite homeowners and buyers having a broad selection of options.

According to the financial information service, Moneyfacts, this rapid turnover represents the shortest lifespan for mortgage offers in six months. Given the heightened volatility in interest rates, borrowers are finding themselves under increasing pressure to make massive financial decisions within an ever-shrinking timeframe.

While the corrective course chartered by the MPC and the Bank of England appears to be working, there are always unintended consequences. Historically, predictability has been the cornerstone of the property market - but the last four years have been anything but.

Co-founder and CEO of GetAgent, Colby Short comments...

Having reached the peak with respect to interest rates, the only way is down from here and homebuyers across the nation will have been hoping that today was the day we started our descent.

Unfortunately, we look set to remain where we are for that little bit longer and although today’s decision won’t kick start the market, it certainly won’t slow the momentum that has been building in recent months.

Buyer activity is on the up, offers are being made and sales are being agreed and we’re already seeing the resulting green shoots of positive house price growth as we enter the spring selling season and what is traditionally the busiest time of year for the UK property market.