Bank of England Interest Rate Announcement – March 20th
Earlier this week, the Bank of England made the latest interest rate announcement. As expected, the central bank decided to keep interest rates steady at 4.25%, despite concerns over inflation. But what does this mean for the UK housing market, and in particular our clients with property for sale in Sheffield & Landlords with property to let in Rotherham?
Understanding the Bank of England’s Decision
The Bank of England’s decision to hold the interest rates steady follows months of rate hikes in an effort to curb inflation. In December 2022, the rate stood at 3.5%, and since then, the Bank has made several consecutive hikes to tackle inflation that reached a 40-year high. The interest rate hikes were necessary to cool down the economy and reduce price pressures, particularly on consumer goods and services.
However, despite the ongoing cost-of-living crisis and inflationary concerns, the March 2025 decision shows a more cautious approach. The Bank has recognised that inflation is slowing, but at a rate slower than anticipated. This signals that the economy is starting to find its balance, and the Bank is no longer inclined to push rates higher-which is great news for the property market; both sales & lettings.
Why This Is Good for the UK Housing Market
- Stabilised Mortgage Rates
The most immediate effect of the Bank of England’s decision is the stabilisation of mortgage rates. In recent months, mortgage rates have been relatively high due to previous rate hikes, making it more expensive for people to buy homes. Fixed-rate mortgages, in particular, have seen significant increases, which affected affordability for both first-time buyers and homeowners looking to remortgage.
By keeping the interest rate at 4.25%, lenders are less likely to increase their rates, which should help maintain mortgage affordability for potential homebuyers. This is especially important for those on the edge of their budget or those who have been holding off on making property moves due to high borrowing costs. Stability in borrowing costs creates a more predictable environment for homebuyers and sellers.
2. Encouragement for First-Time Buyers
One of the key groups most affected by interest rate hikes is first-time buyers. Many first-time buyers rely heavily on mortgages to finance their property purchase. When rates are high, their borrowing power is diminished, making it more difficult to secure the home they want within their budget.
With rates likely to remain steady for the foreseeable future, first-time buyers will have a clearer sense of what they can afford. While mortgage rates will still be higher than the ultra-low rates seen in previous years, the steady approach from the Bank of England offers a degree of predictability, which is critical for first-time buyers navigating the market.
3. Boost to Property Transactions
The decision to hold rates steady provides confidence to both buyers and sellers. When mortgage rates rise dramatically, both groups can become hesitant. Sellers may hold off from listing their properties due to concerns that buyers won’t be able to afford their asking prices, while buyers may decide to wait for a better financial climate before committing to a purchase.
By keeping the rates stable, the Bank of England has helped to encourage more activity in the housing market. It also signals to buyers that there may not be any significant rate hikes in the near future, allowing them to plan their property purchases with greater certainty. This increased confidence is a positive development, as it leads to more transactions and movement in the property market.
4. Reduced Pressure on Homeowners and Buy-to-Let Investors
Homeowners, particularly those on variable-rate mortgages, have been feeling the pinch from rising interest rates, with many seeing their monthly payments increase. This has been particularly difficult for homeowners who were used to lower rates in the past and are now struggling with higher repayments.
The Bank of England’s decision to hold rates steady provides relief for homeowners by reducing the likelihood of further increases. Similarly, buy-to-let investors who rely on loans to finance property purchases will also benefit from more stable interest rates, making it easier to manage their investments and ensure the profitability of their portfolios.
5. Improved Economic Confidence
The UK economy has faced its share of challenges over the past few years, from Brexit uncertainties to the global pandemic. The Bank of England’s decision to hold rates steady indicates a sign of economic stabilisation. A stable economic environment helps reduce volatility in property prices and offers long-term growth prospects for the housing market.
While inflation is still a concern, the slower pace at which it is decreasing suggests that the economy is recovering, and interest rates may not need to rise further. This gives both investors and homeowners the reassurance that the property market is likely to continue its upward trajectory.
The March 2025 interest rate announcement is undoubtedly a positive development for the UK housing market. By keeping interest rates at 4.25%, the Bank of England has created a more stable and predictable environment for homebuyers, homeowners, and investors. While challenges remain, particularly regarding inflation, this decision suggests that the UK housing market will continue to recover and thrive, making it an opportune time for anyone looking to make their next move in property.
If you’re considering buying or selling a home in the coming months, the Bank of England’s latest decision provides a helpful signal that now could be the right time to make a move in the market.
If you would like any further information or advice, get in touch with the team at our Chapeltown or Wickersley branches based in Sheffield & Rotherham where or Property Experts will be happy to assist