Industry reacts to the BOE rate update – what do you think?
While it always seemed a somewhat remote possibility, the mortgage industry couldn’t help hoping against hope that a further base rate cut would be announced by the Bank of England yesterday.
Certainly, the first rate cut in four long years, announced in early August, stimulated market activity, and as the competition hotted up, lenders eyed each other’s rate cuts and tried to surpass them with their own reductions.
Naturally, mortgage professionals wanted more of the same, but with inflation slightly higher than the target rate in August, and the Bank having defined its route back to economic stability as a cautious one, the odds were always stacked against anything more than the 5.00% rate being held.
And so it was. Members of the BOE’s Monetary Policy Committee (MPC) voted by a majority of 8–1 not to change the rate, leaving the industry to pick over the bones of its decision. Some greeted the announcement positively, while others were more critical of what they perceived as the bank’s hesitation.
David Hollingworth (pictured left), associate director at L&C Mortgages said: “It was always going to be a big ask to turn a slim 5-4 majority in August into a further cut this month. In fact, it wasn’t even close to being on the cards. This is consistent with the messaging from the Bank that although the expectation is for interest rates to fall over time, the cuts weren’t likely to come in quick succession.
“There’s been an ongoing price battle being waged by lenders which has seen fixed rates falling steadily in recent months. Today’s decision shouldn’t have shocked the markets so there shouldn’t be any major impact to affect that. I expect that, despite the hold, we will continue to see rates being tweaked wherever possible to try and gain an advantage in a hotly contested marketplace.”
What impact did The U.S. Federal Reserve decision have?
John Phillips, CEO of broker Just Mortgages and Spicerhaart estate agency, pointed out that even The US Federal Reserve cutting interest rates by 0.5% just a day before wasn’t a big enough driver for the MPC, even with the central bank’s tendency to follow its lead. The next cut is anticipated in November, barring any surprises or potential shocks to the economy, said Phillips (pictured second from left).
“Even without another rate cut though, we are continuing to see activity across the market, with lenders in all sectors making reductions and criteria changes to encourage new business and increase market share,” he observed. “From our perspective, clients have responded well to the changes in the market and returned from the summer break with house moves back on the agenda.”
Paresh Raja, CEO of specialist financial lender Market Financial Solutions, was in a pragmatic mood.
“This decision presents an opportunity for investors to prepare for a likely surge in market activity,” said Raja (pictured second from right). “Indeed, the decision comes as house prices continue to rise, and with economists forecasting that the BoE will cut the base rate at the next meeting, we expect demand to experience an uptick in Q4.
“With this in mind, property investors and their brokers should use the next month to consolidate their portfolios and ensure that they have a robust strategy in place to help them capitalise on any opportunities that a more relaxed monetary environment could create. The ability to move at pace will be crucial as activity picks up.
“On this front, lenders also have a vital role to play, and it’s essential that their product offerings are ready to meet the evolving needs of investors and a potential surge in demand.”
Ben Thompson, deputy CEO of mortgage intermediary brand and specialist network Mortgage Advice Bureau, meanwhile maintained it was ‘business as usual’.
“There’s no need to worry, as this was signalled for some time and it was always unlikely for the Bank to cut rates in consecutive months so early on in the cutting cycle,” said Thompson (pictured right). “September has already seen cuts across the mortgage market for those refinancing, and with innovations and reductions also coming for first time buyers, it’s shaping up to be a positive autumn in the housing market.”
Nigel Green, CEO of the independent financial advisory and asset management organisation deVere Group, was less forgiving, describing it as “another mistake” by the central bank.
“This is no time for hesitation,” Green said. “The Bank of England’s decision to pause rate cuts is a missed opportunity. We believe they need to adopt an aggressive approach now to further lower borrowing costs, drive growth, and restore confidence in the UK economy.
“Holding interest rates steady may seem like a cautious move, but it fails to address the urgent need to support economic recovery and competitiveness. High borrowing costs continue to burden businesses, particularly in key sectors like manufacturing, retail, and housing, where investment has slowed, and costs remain high.”
George Abouzolof, senior mortgage broker at Clifton Private Finance, was assured by indicators that the base rate would still see reductions in the coming months.
“We’re seeing rates drop across all loan-to-value ratios, particularly from some larger lenders,” he shared. “There is scope for further base rate reductions in the next year, provided the landscape stays consistent.”
Is the Bank of England’s decision a ‘missed opportunity’?
Meanwhile, Ryan Davies, Strategy Director, Bluestone Mortgages commented that today’s decision will be a blow to borrowers across the country who were hoping for a further rate cut.
“The absence of a further rate cut may be seen as a missed opportunity,” said Davies. “However, it’s not all doom and gloom. Over the last few weeks, we’ve seen increased competition in the mortgage market, with a growing number of lenders now offering sub 4% mortgages.”
Gareth Lewis, managing director of specialist lender MT Finance viewed the bank’s decision as “a prudent move” that signals stability.
“For property investors, this decision may create a stronger demand for alternative financing solutions such as bridging loans,” Lewis reasoned. “A measured approach is key, and we anticipate that a rate reduction is on the horizon as inflationary pressures continue to ease.”
Many are predicting two more cuts before the end of year, noted Tony Hall, head of business development at lender Saffron for Intermediaries, and the mortgage market is starting to ramp up as a result.
“Good levels of supply, with sales instructions up 7% in August compared to the 2017-19 average, points to greater levels of activity for the remainder of the year,” he said. “It is safe to say confidence in the market is increasing, and a busy autumn period will be supported by falling mortgage rates.”
Stephanie Daley, director of partnerships at broker firm Alexander Hall said the rate being held provides stability, particularly for those looking to remortgage, especially with the sub 4% mortgage rates for two- and five-year fixed terms.
“As we approach the two-year anniversary of the Liz Truss mini-budget, this decision offers a sense of predictability, allowing the market to maintain its positive outlook for the remainder of the year,” she said. “September has already been an incredibly busy month, with strong confidence from homebuyers, and keeping rates unchanged should help sustain this momentum, encouraging continued activity in the property market."
