The Bank of England has held interest rates at 3.75% amid increases in global energy prices due to the Middle East conflict.

Its Monetary Policy Committee voted unanimously to maintain the bank rate as it said the conflict would impact households’ fuel and utility prices and have indirect effects via businesses’ costs. It adds that CPI inflation – currently 3% - will be higher in the near term as a result of the new shock to the economy.

This follows a hold in rates last month before the conflict began, when hopes were raised that a cut could soon be on the way - now some traders are warning a rise could happen by the summer, depending on how long the war continues.

Experts

However, many property experts have moved to reassure landlords that the mortgage landscape remains more favourable than a year ago; Propertymark believes that the bank’s decision provides a welcome sense of stability for the market and means landlords can explore financing options without the immediate concern of rising borrowing costs.

Richard Merrett, MD of Alexander Hall, says although swap rates have edged up and some lenders have reduced product availability, the base rate hold should provide reassurance for borrowers that the broader outlook remains stable. “Although swap rates have increased in response to the latest global developments, they remain lower than they were this time last year.”

Variable

While the hold is disappointing for borrowers with variable or tracker-rate mortgages who would have seen a further drop in their monthly payments if there had been a cut, those on existing fixed-rate mortgages won’t see any change, explains Mark Harris, chief executive of mortgage broker SPF Private Clients.

“Borrowers should take action and secure a rate now if they will need a mortgage in the next six months. If the situation improves, you should be able to swap to a cheaper rate. If they continue to rise, you will be relieved that you acted when you did,” says Harris.

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