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News Release

London

JLL comments on Bank of England decision to hold interest rates


Commenting on the Bank of England's decision not to cut the interest rate, Andrew Burrell, Head of Forecasting at JLL, said: "A greater level of political stability following the appointment of the new Prime Minister probably helped to steer the decision to hold interest rates. This can also be taken as a move to reassure the market that the Bank will not take knee-jerk reactions and will remain calm under pressure.

"The market itself is also operating at low rate levels which may have removed the urgency to cut rates this month. Indeed, interest rates continue to soften along the yield curve with most maturities at record lows. A cut shouldn't be ruled out  in August, however, after the market has been given more time to adjust and longer term sentiment is clearer."

Adam Challis, Head of Residential Research at JLL added: "Today's rate hold suggests the Bank of England's Monetary Policy Committee (MPC) did not see the need, or benefit of a rate cut.

"We did not expect mortgage lenders to pass on the rate cut to borrowers and it may be that the MPC decided not to trade off this limited benefit, against further pain for savers.

"A rate move could have been perceived as a rush to judgement and may also have sent the wrong signal to the market at this stage. Any material economic adjustment as a result of the referendum will begin to show up later in the year and the MPC may re-evaluate this decision at the August meeting.

"Improved housing market activity supports labour mobility, which may become more important during a period of weaker economic uncertainty. As a result, support for the housing market will remain a key priority for the Bank of England going forward.

"National house prices may experience short term headwind but according to yesterday's RICS survey expectations are for a return to price growth in the medium to long term."