Colin Bell, operations director at InterBay Commercial, commented: “The bank could be criticised for delaying a rate rise when economic indicators are pointing to an inevitable move upwards. Market demand remains strong and on the back of this demand retailers have pushed prices up, simply because current conditions mean they can. 2007 has seen the MPC adopt a much more reactive stance – a ‘wait and see’ approach - as opposed to striking proactively; holding rates today is another example of this.
“Last month some MPC members were seriously discussing the need for a 0.5% rise in one move; as they cautiously increased rates by just 0.25% last month and have held off making any further increase this month, one can only assume they have been overruled. It would also seem to be the case that the speculators amongst the committee are choosing to ignore the factors which led their more prudent colleagues to moot the need for more aggressive action. It will be interesting to see how the vote was split this month."
Jonathan Cornell, technical director at Hamptons International Mortgages, said: “The MPC’s decision to hold the base rate at 5.50% this month is unsurprising given last months decision to raise it by a quarter point.
“Reports this month highlight a decline in inflation from the record reaching heights of April and the early signs of a cooling housing market. It, therefore, seems like the sensible decision to offer borrowers some breathing space before the further inevitable increases predicted by many analysts. However, regardless of the amount of breathing space the MPC decides to offer, borrowers will still be left with an impending sense of insecurity as ‘good’ fixed rate deals become few and far between and variable rates remain surrounded by a certain sense of the unknown.”
Brian Murphy, head of lending at Mortgage Advice Bureau, commented: “Following May’s rise, today’s decision by the MPC to hold the base rate at 5.50% appears a logical and sensible decision. While city analysts remain in agreement that the only way is up, and predict that the base rate will hit 6.00% by the year end, it seems the MPC has decided to let the effects of last month’s rise play out.
“Reports issued in May by the Land Registry, Halifax and the CML suggest a certain amount of evidence to show that the past four successive rate rises are having the desired cooling effect on the housing market. Inflation figures also show the start of a recovery from the record heights of April.
“However, while June may offer borrowers a month to steady themselves from last months rise a hold is unlikely to last. Borrowers should be prepared for further rate increases and their subsequent effects upon mortgage repayments. The opportunity to return to a first time buyers market seems to be slipping ever further away.”
