As the Bank of England implements its latest hike in the base rate, industry experts are suggesting that this might mark a pause in the series of increases that have taken place. Amid the backdrop of a dynamic UK property market and evolving inflation figures, this potential shift in rate policy could offer a sense of relief for various sectors of the economy.

In June, the inflation rate in the UK stood at 7.9%, slightly below economists’ predictions of 8.2%, signalling a potential slowdown in the upward trajectory. This comes as a contrast to the Bank of England’s 14 consecutive rate hikes prior to the recent adjustment. While the consecutive rate hikes have been a noteworthy aspect of the economic landscape, market commentators like Nick Leeming, the chairman of Jackson-Stops estate agency, propose that this might be the last hike for the foreseeable future.

Speaking to PropertyWire about the most recent hike, Leeming remarked:

“Today offers a very different picture to December 2021, when the base rate sat at 0.1%. But green shoots are growing by the day. Inflation is now falling, which suggests that the tide may be turning, and if this remains the case for July and August, this could be the last rate hike for some time allowing investment markets time to settle again.

“For the property market, while incremental changes to the base rate won’t derail buyers and sellers plans entirely, the increased pressure that has been put on the cost of borrowing means realistic property pricing is essential to achieve a sale, especially at the mid-level of the market.”

Jatin Ondhia, the CEO of investment firm Shojin, echoed the sentiment of a potential shift in interest rate trends:

“There is a sense that we might be nearing the top of the interest rates mountain. Inflation is finally falling, with the next set of data on 16 August expected to show another notable decline.

“In turn, pressure will ease on the BoE, meaning it can slow or pause on its hiking of the base rate. All of this would allow for much-needed stability and hopefully a bit of confidence to return.”

While the recent base rate increase did come into effect, the fact that it was of a smaller magnitude than initially predicted carries some positive implications. This development allows lenders the opportunity to re-evaluate their interest rates in light of the adjusted economic landscape.

Paresh Raja, CEO of specialist lender Market Financial Solutions, observed that despite the rate hike, there is an element of optimism in the comparatively modest increase, which could permit lenders to recalibrate their strategies.

In its commentary, the Monetary Policy Committee (MPC) acknowledged the anticipation of a decline in inflation to approximately 5% by the end of the year. However, the targeted 2% inflation rate might not be realised until the second quarter of 2025. Despite this, the MPC retains the option to further increase rates if evidence of persistent inflationary pressures emerges.

Steve Clayton, the head of equity funds at Hargreaves Lansdown, reflected on the decision of the Bank of England:

“Inflation data has been improving, but the economy remains stronger than many expected. In the end, the Bank opted to play it safe.

“A quarter-point rise keeps the pressure on – but does not add too much to the heat.”

As the UK property market navigates these evolving economic dynamics and inflation trends, the recent rate hike could signify a potential inflection point, prompting a period of observation and recalibration as the nation’s financial landscape adapts to changing circumstances.

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Picture credit: Colmer’s Hill in Bridport. Photo by George Hiles on Unsplash