The Bank of England’s Monetary Policy Committee (MPC) has once again voted to maintain the Bank Rate at 0.10%.
Only two MPC members voted for a rise, despite widespread expectations that the central bank would increase the cost of borrowing to 0.25%.
The Bank expects inflation to peak at 5%, well above its target of 2% and a rate rise was widely expected in the City.
Tomer Aboody, director of property lender MT Finance, said: “With interest rates so low for so long, boosting the UK economy and helping fuel the housing market by pushing property prices to their highest-ever levels, an upwards adjustment is on the cards; if not now, then in coming months.
“Any increases are likely to be gradual and over a period of time, helping keep inflation in check, as well as dampening down the prospect of future house price increases. This would be welcome, as the housing market has been frenetic.
“Banks and institutional mortgage lenders are still very much liquid, so competition on mortgages will still be high, even if interest rates rise. There may not be the plethora of sub-1 per cent deals, with many lenders pulling these already, but mortgages will still be affordable and on the relatively cheap side.
“The Bank may have held fire too now realising that raising rates too soon would cripple mortgage borrowers on variable rates, along with others who are coming up to their term end and needing to refinance.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, added: “Although a rise in interest rates would have had a modest impact as only a small proportion of borrowers are on variable-rate deals, the consequences for the housing market could have been much more significant.
“Activity and price growth has been slowing since government support schemes started winding down. An interest rate rise would compromise confidence for some, particularly first-time buyers on tight budgets concerned about the future direction of travel of rates. As the housing market is built on confidence, a rate rise, and perhaps two or three more to follow, would inevitably have an impact on activity.”