The Bank of England announced Thursday that it would hold interest rates steady following slower-than-predicted economic growth.
The monetary policy committee’s decision to keep rates at 0.5% for the foreseeable future means home buyers can still take advantage of mortgage costs that are at near-historic lows.
The U.K’s economy grew by only 0.1% in the first quarter of 2018, the slowest rate in five years, according to the bank’s policy summary published on Thursday. And while the policy committee believes the weakness was temporary—due in part to bad winter weather—Brexit continues to dog the British economy, said the bank’s governor Mark Carney on Thursday.
“While the storms of February and March have given way to sunnier skies, the economic outlook for the U.K. remains clouded by Brexit uncertainties,” Mr. Carney said in opening statements.
He expressed uncertainty that consumer spending would pick up in the medium term and pointed to the continued weakness in the housing market as evidence of people’s reluctance to make purchases.
“Households could opt to save rather than spend as their real incomes recover,” he said.
Paradoxically, now may present a prudent time to take out a mortgage on a new home, as the cost of borrowing is historically low and will rise imminently, said Shaun Church, director at mortgage lender Private Finance.
The best way to take advantage of the low rates would be to lock in a fixed-term deal, Mr. Church said in response to the bank’s rate decision.
“While five- or 10-year fixes may have fallen out of favor recently, now could be the time to reconsider locking into a long-term fix,” he said. “What they lack in flexibility, they make up for in certainty, enabling the borrower to enjoy near record-low rates for up to a decade.”
In some cases, borrowers may already have missed the cheapest rates as lenders have already started to increase borrowing costs in anticipation of a bank rate hike by the end of the year, said Knight Frank Finance in response to Thursday’s news.
“A rise is coming and mortgage markets are increasingly pricing this in,” according to the brokerage’s analyst. “Barring any unforeseen circumstances, I would expect the long-awaited rate rise to come sooner rather than later.”
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