Experts said borrowers could benefit from a gradual improvement in mortgage deals over the summer.
Mortgage lenders could be encouraged to make more rate cuts in the coming weeks, while savers could also have a “valuable window of opportunity” as the Bank of England base rate remains on hold, finance experts have suggested.
The base rate was kept at 3.75% as the Bank cautioned that the cost of living was still set to rise this year amid the fallout from the Iran war.
Mortgage rates initially jumped during the conflict but many lenders have been making cuts in recent weeks, including Barclays, which said on Thursday that it is set to make further reductions on Friday.
Simon Gammon, managing partner at Knight Frank Finance, said: “The Bank of England’s decision to hold rates, combined with weak pay growth and lower-than-expected inflation, will pave the way for mortgage lenders to cut rates over the coming weeks.”
He added: “While we are unlikely to see a dramatic fall in mortgage rates, borrowers should benefit from a gradual improvement in deals over the summer, which will help support housing market activity later in the year.”
David Hollingworth, associate director at L&C Mortgages, said: “The outlook for mortgage borrowers has taken a turn for the better in recent weeks, further strengthened by the surprise stability in the rate of inflation and a proposed peace deal in Iran.”
Nicholas Mendes, mortgage technical manager at John Charcol, said of the mortgage rate reductions: “The recent cuts have tended to be small and frequent rather than dramatic, and that is the more realistic shape of things to come.”
He said mortgage rate pricing “is still being pulled around by swaps (which are used by lenders to price mortgages), funding costs, and expectations for where rates head next, and the outlook can turn quickly on a fresh piece of news, as the last few months have shown”.
Nick Leeming, chairman of Jackson-Stops, said: “While transaction levels may remain measured in the months ahead, holding rates should help avoid additional pressure on affordability and support continued activity among buyers and sellers.
“The market remains highly needs-driven, with people continuing to move for work, family and lifestyle reasons, and today’s decision provides a more predictable backdrop against which those decisions can be made.”
Nicky Stevenson, managing director of Fine & Country, said the housing market “remains competitive, with buyers having more choice than they have had for years, so sellers who price realistically are best placed to attract interest and achieve a successful sale”.
Frances McDonald, director Savills residential research, said: “In the mainstream housing market, we are forecasting price falls of 2.0% over this year, with the most significant falls in London and the South East.
“The prime markets, though less exposed to the interest rate environment, are more exposed to domestic political uncertainty and so we are also forecasting a softening of values over the course of the year, with a stronger recovery pushed out until 2028.”
Nathan Emerson, chief executive at property professionals’ body Propertymark, said that as borrowing remains relatively expensive compared with recent years, “holding rates steady avoids adding further pressure to household budgets and gives the housing market an opportunity to adjust”.
Jason Tebb, president of OnTheMarket, said: “With lenders continuing to ease mortgage rates on the back of lower swap rates, there is cause for optimism among borrowers.
“As ever, many people simply need to move.”
People whose mortgage is due to end were also being encouraged to do their research early.
Jenny Ross, Which? Money editor, said: “If your mortgage deal ends this year, ensure you start shopping around for a new deal at the earliest opportunity.
“This gives you the best chance of securing a good rate, and protects you if they unexpectedly rise again.”
She said savers “should also keep a close eye on their accounts, and be ready to switch if their interest rate isn’t keeping pace”.
Ms Ross added: “Some of the most competitive accounts are currently offering returns around the 5% mark, so it’s well worth checking to see if there’s a product that could suit your needs better.”
Aaron Shinwell, chief lending officer at Nottingham Building Society, said: “For savers, this could represent a valuable window of opportunity.
“Cash Isa rates remain competitive, but it pays to shop around rather than assume loyalty delivers the best return.”
