Bank of England holds rates as mortgage uncertainty persists

The Bank of England has held interest rates at 3.75%, reflecting continued uncertainty over inflation and the duration of the conflict in the Middle East.

For mortgage borrowers, the decision offers a degree of stability, but not much certainty. Mortgage rates have edged down slightly in recent weeks, though leading fixed rates remain above 4.5%, with two-year fixes around 4.64% and five-year deals closer to 4.75%. Tracker products remain cheaper, with some priced just below 4%.

The gap between trackers and fixed rates has prompted more borrowers to consider variable-rate options. Around 40% of Knight Frank Finance clients are now opting for trackers, compared with a historical range of 10% to 15%.

Stability in the short term may not last. Lenders are operating on thin margins and have limited capacity to absorb volatility in swap rates. Those offering the most competitive deals can quickly become inundated with applications, forcing them to reprice higher to manage business levels.

That creates the risk of mortgage rates moving sharply on any negative news. The combination of geopolitical uncertainty, thin lender margins and rapid repricing means borrowers should use the current window of relative stability to secure a deal.

The wider housing market remains finely balanced. Buyer demand is running 7% below last year, while the March RICS survey showed new buyer enquiries falling to -39%, the weakest reading since August 2023. Agreed sales also declined to -34%.

House prices are under some pressure in the short term. Halifax reported a 0.5% fall in March, while Rightmove said asking prices rose by 0.8% in April, below the seasonal norm of 1.2%. Elevated levels of supply are giving buyers more negotiating power, and financial readiness still puts buyers in a stronger position.

Preperation is a key advantage. Securing mortgage advice early can strengthen an offer, reduce the risk of delays and allow borrowers to move quickly when the right property becomes available.

If you’re planning to buy or remortgage, speak to one of our brokers today. We scan more than 200 lenders to find the right deal, can secure a rate quickly and keep your options open if the market improves.