Property professionals breathed a sigh of relief after the Bank of England held the base rate at 5.25%, a 15-year high, allowing it to reflect on how the recent rate-rising cycle has hit households.  

The BoE’s Monetary Policy Committee voted 6 to 3 to hold rates at their September level, after raising the base rate 14 times from its 0.1% historic low in December 2021.  

The MPC minutes say that “subdued economic activity”, a weakening labour market and higher oil prices in the Middle East mean that UK gross domestic product will be flat in the third quarter of the year.  

It adds that some business surveys forecast “a slight contraction” in the final four months of 2023.  

The committee notes that markets are betting that the base rate remains around 5.25% until the third quarter of next year, falling gradually to 4.25% by the end of 2026.  

The MPC forecasts it will not hit its 2% target for three years.   

Rightmove mortgage expert Matt Smith says: “A second consecutive pause is a good indicator that the base rate has reached its peak, which will be reassuring to those looking to take out a mortgage soon.   

“We’ve now seen the arrival of a sub-5%, five-year fixed-rate mortgage in the important 85% loan-to-value bracket — the deposit size we see for many first-time buyers and home-movers.   

“After today’s news, we can expect mortgage rates to continue to edge downwards”.  

The MPC’s decision comes after data showed that UK gross domestic product grew by 0.2% in August, following a fall of 0.6% in July, according to the latest data from the Office for National Statistics.  

UK inflation remains unchanged at 6.7% in the year to September, while wages rose by 8.5% in the year to July.    

The country’s unemployment rate lifted to 4.2% between June and August, up from 4% in the March-to-May quarter, as firms appear to be hiring less as the impact of rising prices and higher interest rates starts to bite.  

However, SPF Private Clients chief executive Mark Harris says: “Many lenders have reduced their fixed rates in the past weeks on the back of calmer swaps, which underpin the pricing of fixed-rate mortgages.   

“While the days of rock-bottom mortgage rates are long gone, we expect pricing to continue to improve over coming weeks.   

L&C Mortgages associate director David Hollingworth adds: “With another hold decision borrowers will now be hopeful that they have seen the last of rising rates.    

“Of course, we will need to avoid any more nasty surprises and see inflation continue to fall but the mortgage market has already shown much greater stability.   

“Mortgage rates have been improving slowly but surely and today’s decision should only help to ensure that trend continues for now.”  

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “In our offices, we are finding that many people who want to move are holding off until they see mortgage rates and inflation come down further, with little prospect of further rises.”  

But BSA head of savings and economics Andrew Gall points out: “The number of borrowers struggling to maintain their mortgage payments has started to increase.   

“While building societies’ lower risk approach to lending decisions means they have proportionately fewer loans in arrears compared to banks, there is no room for complacency.”