The Bank of England has confirmed it will hold the base interest rate at 3.75% following its latest Monetary Policy Committee meeting. Notably, a rate cut had been widely expected before the conflict in the Middle East escalated. That expectation has now been reversed.
The key driver is the closure of the Strait of Hormuz following US and Israeli attacks on Iran, disrupting approximately 20% of the world’s daily oil and gas supply. Oil prices have risen to close to $110 per barrel, creating fresh inflationary pressure and prompting the Bank to hold firm. Markets now expect rates to remain elevated, with some forecasts placing the base rate above 4% by 2027.
For buyers and homeowners, the practical impact is already being felt. Lenders have begun increasing fixed rate mortgage deals in response to shifting market expectations. Those approaching the end of a fixed rate or considering a purchase in the coming months should seek advice sooner rather than later, as the prospect of rates falling in the near term has receded.
Despite this uncertainty, demand for property in London remains strong. Supply of homes continues to fall short of demand, which has historically helped to support values in the capital even during periods of economic uncertainty. Well prepared buyers and sellers remain well placed to move.
At Drivers and Norris, we are here to help you make sense of the market and plan your next move with confidence. Please do not hesitate to get in touch.
— Drivers & Norris
Source: BBC