Mortgage lenders could be encouraged to make more rate cuts in the coming weeks, while savers could also have a “valuable window of opportunity” as the Bank of England base rate remains on hold, finance experts have suggested.
The base rate was kept at 3.75% as the Bank cautioned that the cost of living was still set to rise this year amid the fallout from the Iran war.
Mortgage rates initially jumped during the conflict but many lenders have been making cuts in recent weeks, including Barclays, which said on Thursday that it is set to make further reductions on Friday.
Simon Gammon, managing partner at Knight Frank Finance, said: “The Bank of England’s decision to hold rates, combined with weak pay growth and lower-than-expected inflation, will pave the way for mortgage lenders to cut rates over the coming weeks.”
He added: “While we are unlikely to see a dramatic fall in mortgage rates, borrowers should benefit from a gradual improvement in deals over the summer, which will help support housing market activity later in the year.”
David Hollingworth, associate director at L&C Mortgages, said: “The outlook for mortgage borrowers has taken a turn for the better in recent weeks, further strengthened by the surprise stability in the rate of inflation and a proposed peace deal in Iran.”
Nicholas Mendes, mortgage technical manager at John Charcol, said of the mortgage rate reductions: “The recent cuts have tended to be small and frequent rather than dramatic, and that is the more realistic shape of things to come.”
He said mortgage rate pricing “is still being pulled around by swaps (which are used by lenders to price mortgages), funding costs, and expectations for where rates head next, and the outlook can turn quickly on a fresh piece of news, as the last few months have shown”.
Nick Leeming, chairman of Jackson-Stops, said: “While transaction levels may remain measured in the months ahead, holding rates should help avoid additional pressure on affordability and support continued activity among buyers and sellers.
“The market remains highly needs-driven, with people continuing to move for work, family and lifestyle reasons, and today’s decision provides a more predictable backdrop against which those decisions can be made.”
Nicky Stevenson, managing director of Fine & Country, said the housing market “remains competitive, with buyers having more choice than they have had for years, so sellers who price realistically are best placed to attract interest and achieve a successful sale”.
Frances McDonald, director Savills residential research, said: “In the mainstream housing market, we are forecasting price falls of 2.0% over this year, with the most significant falls in London and the South East.