Advisers debate the impact of the Bank of England decision
With a gap of four years between the last Bank of England base rate cut and this latest one, it could be joked that these rate revisions currently come along as often as the Olympics.
But will brokers be going for gold following the Monetary Policy Committee’s decision to make its first rate cut since 2020, or will it take more than a reduction from 5.25% to 5.0% to see the mortgage industry sprint into the winning lane?
Certainly some advisers are already reporting an increase in enquiries, while others believe that there are borrowers who are still biding their time before committing to a new mortgage deal, in the hope that the rate could fall further.
Hiten Ganatra (pictured left), managing director of independent mortgage broker Visionary Finance, is encouraged that the business has seen an uptick in calls.
“A change to a decreasing rate environment will definitely give consumers more confidence and undoubtedly many have sat on their hands over the last few months, so we can expect to see some start to make transactions,” Ganatra told Mortgage Introducer. “However, it may not be enough to get some off those hands with looming tax rises in October's budget. It indicates a direction of travel and sometimes that can be the catalyst for the market to start moving at a quicker rate than has been the norm over the last 18 months / two years.”
Helen MacKenzie (pictured second from left), consultant at MacKenzie Mortgages, reported: “I have seen a small steady increase in buyers since the rate reduction, as some were already waiting for the rate reduction before purchasing, but I expect more to follow if there are further rate reductions. This won’t impact and change the market by much, as fixed rate reductions have been very small so far.”
Meanwhile, Joela Jenvey (pictured centre), independent mortgage & protection consultant at Nurture FS, said she had seen an increase in enquiries since the General Election, as market confidence returned.
“The base rate decrease sends out a compounding, positive message which will only reinforce this,” Jenvey stated. “I think a focus on more competitive two and three-year residential fixed rates would help as customers understand from the media that base rates are reducing medium term, and they don’t wish to tie in for five years.”
How much difference does a base rate cut make to mortgage business?
Michelle Lawson (pictured second from right), mortgage adviser and director at Lawson Financial, identified an uptick in activity before the base rate cut.
“The cut will give added incentive and hopefully will be the thing that people have been waiting for to spark some movement,” she noted, but added: “The cuts aren’t the be all and end all. The whole market needs to change for the better by way of improving transaction times across the board. Everything aligning in a more cohesive way would help kick-start things too.”
Specialist mortgage adviser George Sanford (pictured right), from Vibe Finance, believes that the rate reduction is a much needed boost for property investors, but emphasised that the direct impact for them had been driven by a subsequent fall in swap rates, causing many lenders to reduce rates by up to 0.5%
“We have already seen an uptick in clients looking to re-ignite older enquiries and sending new opportunities across, checking how the new rates might impact their figures for a deal,” he explained.
John Phillips, CEO of UK-wide broker Just Mortgages, said that because it is a quieter time due to school holidays and annual leave, he wouldn’t expect a massive boost to business just yet, though brokers are talking to clients with more confidence.
“The first few weeks of September will be the moment of truth in my opinion,” he predicted. “One of the biggest challenges for brokers is explaining to borrowers that the base rate and mortgage rates are not really linked unless they have a base rate tracker product. A cut to base rate will impact swap rates and the price lenders pay to borrow money, but it won’t necessarily have a direct impact on the borrower and their mortgage rate. However, it is good news.”
Read more: More UK lenders cut mortgage rates
How active is the housing market?
Karl Wilkinson, CEO of broker firm Access Financial Services, acknowledged that the housing market had been stagnant for a while.
“I suspect that now there will be a larger trickle of enquiries, but flood doors will not be open just yet,” Wilkinson observed. “People under increasing pressure to buy or sell will make a move now, while those who can hold out will probably wait it out. My gut feeling is that 4% mortgage rates is the mental boundary for most.”
Aaron Tyson, director of Open Financial Advice, an appointed representative (AR) of broker firm Rosemount Financial Solutions (IFA), has seen more new enquiries in light of the base rate and believes this will build as confidence and sentiment begins to improve.
“Most mortgagers are attracted to headline fixed rate levels and because swap rates have tumbled in the wake of the base rate, we’re likely to see fixed rates continuing to reduce and being offered at a much more palatable level,” Tyson commented.
Finally, broker Damian Youell, director of NeedingAdvice.co.uk - another AR of Rosemount - declared that at least 20 rate switch clients had contacted the business since the rate cut. “What the market really needs is stability, then market activity will increase,” he said.
