Interest rate remains despite calls for a cut to 'revitalise the housing market'

With the inflation rate hitting a new two-year low as the cost of living measure slowed to 3.4% in February, there were hopes that the Bank of England would lower interest rates and potentially 'revitalise the housing market'.

Inflation is down from 4% in January, mainly attributable to a 5% drop in food inflation, although the Office for National Statistics warned that housing costs remain high. It had prompted hopes that the Bank of England would be encouraged to cut interest rates and that there could be a boost for the housing market as buyer purchasing power improves.

However, the Bank of England held rates at 5.25% today, with Governor Andrew Bailey saying it is "not yet" the time to cut interest rates. He added that although there were "further encouraging signs" that inflation is coming down, policymakers have to be sure that it will fall back to its 2% target and "stay there".

So far this year, the housing market recovery has been slow and inconsistent as inflation and jobs data send mixed signals. Mortgage costs have crept up, despite some deals becoming available and downwards pressure on prices has increased.

Nathan Emerson, chief executive of Propertymark, said: “This is an ideal time for the Bank of England to start considering a cut in interest rates when they meet this month. Propertymark’s own Housing Insight Report shows that there has been an average 120% increase in the number of potential buyers registered per member branch and this is potentially an ideal time to revitalise the housing market.”

We'll now need to wait until next month to see if inflation falls further, and whether that will be enough for the Bank of England to consider cutting interest rates.