Andrew Frankish, managing director at Mortgage Talk, said: "Recent modest interest rate rises are having some effect on the market. Although I am pleased with the Bank's decision to leave interest rates as they are for the moment, we actually welcome some heat being taken out of the market, as this will help stabilise prices and hopefully herald the return of the first-time buyer.
"We are in little doubt that there will be at least one further slight rate rise during the year. This may be necessary to help keep house price inflation down at a sensible level. Ideally, we'd like to see rises of about 7% or 8% year on year, which would help to keep average prices in check.
"The Bank of England must tread carefully, however. On the one hand, house prices have risen well above the rate of inflation for the past few years, experiencing double digit growth in many regions. But, on the other hand, businesses are starting to worry about the cost of borrowing and, moreover, the strength of the Pound, which is making our exports uncompetitive."
Steve Cox, operations director of Spicerhaart Financial Services,commented: “Borrowers will be relieved at the decision to hold the Base Rate this month as the recent succession of rises has already begun to take effect, over-stretching consumer finances. This respite should help to reinstate homebuyer confidence and encourage a larger proportion of first time buyers to step onto the property ladder, boosting market activity.
“A further rate rise would have proved damaging to the market and borrowers are unlikely to have been prepared for the possibility of their monthly repayments increasing so soon after the rise in July.”
Stuart Law, managing director of Assetz, said: “The decision to maintain rates has offered homeowners a major respite following the impact of last month’s rise. We believe that this is the first signal that interest rates have reached their peak and expect the MPC to show some patience as it waits to judge the impact of its recent rises.
“The latest rises, combined with many home-owners already having fixed rate deals coming to an end will be enough to contain house price increases to reasonable levels. Another rise in interest rates now would have caused a great deal of distress to those already straining under the pressure of five increases over the past twelve months.
“Inflation will be back to 2% or less before the end of the year and further rises are unnecessary.”
Brian Murphy, head of lending at Mortgage Advice Bureau, commented: “It appears that the hawks within the MPC have been tamed by the doves this month and the opposition to raising the Base Rate in July have called for restraint in August.
“With several reports highlighting the possible beginnings of a housing market slowdown it seems certain MPC members have been successful in convincing others that restraint is needed if the effects of five rate hikes are to have the desired effect.
“While it will give little respite to already stretched borrowers some time is most definitely needed to let the rate rise medicine take effect and the potential for a period of stability to materialise.
“A month’s break will not offer any instant benefits to borrowers. However, lenders have been factoring the future predicted 6.00% rise into their mortgage products for the past few months; so while ‘good’ fixed rate deals will not appear immediately there is still over a third of the year left for things to change – even if the hawks do get their way again.”
