The jury is out among brokers on what the BOE should do next
The Bank of England’s base rate cut had been so long anticipated – four years in all, count them – that it was inevitable that the mortgage industry would almost immediately consider when the next reduction would come.
Was this the beginning of a series of rapid-fire cuts, each quickly following the other, or would the Bank’s Monetary Policy Committee step back and, over several months, survey the fallout from last week’s decision to cut the rate from 5.25% to 5.0%, before embarking on further action of a downward trajectory?
A flurry of mortgage rate revisions by lenders, big and small, in the week since, has done nothing to quell the speculation. Yet opinion among brokers appears to be remarkably split, on whether further base rate cuts are a good thing and when they might happen, if at all.
Samuel Whittlesea (pictured left), mortgage adviser and financial protection specialist at Whittlesea Mortgages expects further rate reductions later this year, and into 2025, but only if the UK’s political and financial landscape and favourable global conditions allow them. Any boost to consumer confidence will likely be offset by borrowers holding out for further reductions, he suggested. The industry won’t see any significant changes in client behaviour before there is a 1% base rate – and he prefers a calmer market over headline-grabbing rate cuts.
“I wouldn’t encourage any further BoE rate cuts,” Whittlesea told Mortgage Introducer. “I don’t think we need them, as the current rate allows sensible mortgage rates as well as decent savings rates - it works for everybody. Stability would be the best thing for our economy, as without it there is too much speculation and waiting for a better day.”
Kim Balasubramaniam (pictured centre), senior mortgage adviser at The Mortgage Mum, welcomed that – anecdotally at least - the recent base rate cut does seem to have given buyers confidence that the market might be beginning to shift, but she cautioned against further decreases too soon.
“As much as I would love to see further base rate cuts in the very near future, I think that any additional cuts will have to be made slowly and carefully,” she said. “Services inflation and wage growth remain high, and with the first budget of the new government not due until the end of October, I would expect any further cuts, if they are to be made, to come in the November meeting rather than in September.”
What date will the next base rate cut happen?
John Phillips (pictured right), CEO of broker Just Mortgages, agreed the Monetary Policy Committee Bank will possibly wait until November before making any further cuts, to assess the impact of its most recent decision.
“Like many across the industry, I would fully welcome further cuts to the base rate, to help take the pressure off borrowers and relieve some of the clear affordability challenges we’re seeing,” Phillips said. “The housing market is a key driver in the success of the wider economy, so it’s vital we have the right conditions to enable it to not only operate, but to grow and succeed. Of course, we have to be careful. We don’t want to ruin all the hard work of the past couple years and for the pain we’ve all experienced to be for nothing. The central bank will undoubtedly need to take a measured approached, but for the sake of the market and the economy, it cannot dither and be slow to react.”
Michelle Lawson, mortgage adviser and director at Lawson Financial, concurred - urging the Bank of England to go faster.
“They need the courage of their convictions and just get the job done,” Lawson declared. “They should have done it a long time before they did. The US are also showing how disastrous it has been to leave a rate cut too long. I think September 19th may bring another rate cut.”
Read more: Have mortgage brokers seen a business since the base rate cut?
What could influence the Bank of England’s next base rate decision?
The Bank of England would take further action in the coming months, anticipated Joela Jenvey, independent mortgage and protection adviser at Nurture FS.
“I believe there is still room for the base rate to decrease before the end of 2024, although inflation tends to be higher over the winter months,” she noted. “I guess it depends on what changes happen in the Autumn budget in October and how these changes effect the housing market and rental sector.
“I’m not sure that base rate cuts happening in quick succession would be a good thing. It would be better in my opinion to have some stability for the remainder of 2024. Lender product decreases are better managed gradually. Spikes in lending volumes have a negative impact on service for lenders, which in turn cause product rates to increase anyway to stem market share, so could therefore be counterproductive.”
Rate switches will add to pressure upon underwriting and processing timescales, Jenvey added.
Helen MacKenzie, consultant at MacKenzie Mortgages, is clearly looking forward to the Bank of England cutting the rate still further.
“As soon as possible would be best for customers, of course,” she shared, “but I’m sure they will act cautiously.”
Meanwhile, Aaron Tyson, director of Open Financial Advice, an appointed representative of Rosemount Financial Solutions (IFA), acknowledged that many – including himself - had eyed September for a further base rate cut. He looked further ahead, however, to what might happen longer-term.
“Generally, it seems that the consensus of a best-case scenario would be 4% by the end of 2025,” Tyson said, “before settling somewhere between 3% and 3.5% in 2026.”
