The Bank of England has been told to ‘pull it’s finger out’ after it announced today that the base rate has frozen at 5.25 per cent for the seventh consecutive time following 14 increases – there is an an ‘expectation of cuts’ in the future alongside worries about older lenders and the housing market.
Following the news that the Bank of England has voted to hold the base rate once again, comments from national brokerage Just Mortgages, which is part of Spicerhaart, say that it’s time for the Bank of England to ‘pull it’s finger out’. Inflation has reached the two per cent target, and the national brokerage say that a cut today would have been a ‘real adrenaline shot’ in the lead up to the UK’s election.
Ben Allkins, head of mortgages and protection at Just Mortgages, said:
“If there was ever a time for the Bank of England to finally pull its finger out, this was certainly it. Yet, in spite of inflation finally reaching the illusive 2% target, and recent GDP figures showing a flatlining economy, the MPC is still watching and waiting.
“While we can be encouraged by positive levels of buyer registrations and requests for valuations and appointments, a cut today would have been a real adrenaline shot to help carry us through a summer full of potential distractions – particularly with a general election. For now, we just have to hope swap rates react favourably to further stability in the base rate, giving lenders some wiggle room to reprice.
“With potential borrowers still desperately trying to navigate the market and deal with clear affordability challenges, brokers must stay visible and proactive, highlighting the wealth of options out there to support all types of borrower, as well as the cash that is still available from lenders willing to lend.”
Rates have held, after a flurry of increases between 2021 and 2023, but industries have stated for economic growth to flourish ‘more cuts are needed’. Predictions of ‘more cutting later this year’ hold promise, but an improvement in real estate ‘may not be seen until 2025’.
The rate holding steady has come as ‘no surprise’ especially for those who work with firms lending to those over 55. Bosses say there has been little mention of ‘older lenders’ nor ‘stimulation to aid older borrowers’.
Simon Webb, managing director of capital markets and finance at LiveMore, commented:
“The Bank of England’s decision to again hold the base rate at 5.25% comes as no surprise, continuing the bank’s trend of following market sentiment instead of steering it.
“Unfortunately last week’s manifestos also offered little stimulation to help older borrowers. The Conservatives’ pledge to increase the threshold at which first-time buyers pay Stamp Duty to £425,000 from £300,000 offers no support for older buyers, effectively trapped in their homes. If stamp duty was lifted for all buyers up to this threshold it would enable older borrowers to downsize, freeing up larger homes for younger borrowers.
“The Labour pledges similarly fail to address older borrowers’ needs despite the very real fact that we have an ageing population, with over 20 million people currently over 55.”
Others have commented on the consistent rate as a forecast for stability, however, a need for interest rate downturn has been deemed essential for market growth.
Andrew Lloyd, Managing Director at Search Acumen, the property data and insight provider, comments:
“Today’s announcement to keep interest rates at 5.25% signifies the seventh month in a row that rates have been held. Steadier rates have undoubtedly brought a calm and consistency that hasn’t always characterised our recent economic history, and that shouldn’t be undervalued. But the story we’ve heard consistently over the last few years has been about how the cost of borrowing has hampered market activity and that picture won’t change until we are seeing rates shift downwards consistently.
All the indicators are that we will see some rate cutting this year which will start to build confidence and unlock growth, however with some actually predicting a small uptick in inflation towards the end of 2024, it could well be 2025 before we begin to see a bigger renewal of investment appetite in commercial real estate.”
Hopes for a rate cut in today’s announcement have been called ‘premature’ and hopes that a cut will take place in the summer will ‘help further strengthen the housing market’. Others have taken the view that there’s finally ‘light at the end of the tunnel’ for the housing market as outgoings have stretched working Brits to the limit and made it harder for potential homebuyers to save for a house deposit.
Joe Pepper, UK Chief Executive Officer, PEXA, said:
“The decision to hold the base rate is disappointing for borrowers, especially with inflation now at its 2% target. It now very much feels like mile 25 of a marathon for them as we crawl to the next MPC meeting in August in the hope it will bring a substantial cut. They are, understandably, waiting for this to see if they can get a cheaper deal before remortgaging.
“As such, we are expecting huge spikes in demand in H2. 1.6 million people are coming to the end of their fixed rates and this will be exacerbated by a myriad of housing policies being championed by each political party as part of their General Election campaigns, all of which are designed to create demand. This is all very well and good, but the current conveyancing infrastructure is simply not equipped to handle a significant or sustained increase in transactions.
“We must help lenders and conveyancers not only handle the increased demand from borrowers, but also to ensure that the UK benefits from the wider economic benefits that policies stimulating the front end of the market can bring. The role of private sector investing in technology and digital transformation will be pivotal in this, but it will only work on a national scale if supported correctly on a governmental level. Cross-sector commitment and collaboration to achieve modernisation is vital, and it can’t come soon enough.”
Jason Ferrando, CEO of easyMoney says:
“We’ve now seen inflation dip to within the Bank of England’s two percent target but hopes of a rate cut today were probably a tad premature. That said, it’s looking increasingly more likely that one will materialise this summer and this will help to further strengthen a housing market that has seen stability return.
“The downside of falling rates is, of course, that savers will now see the interest earned on their nest egg start to dwindle. We’ve already seen the rates being handed down to savers from the big banks start to fall since the base rate has been held and the prospect of a cut will make it all the harder to save for that all important mortgage deposit.”
