Industry reacts to the BOE rate update – do you agree?
The Bank of England’s decision to hold the base rate at 5.00% has received a mixed reaction from the industry – with some branding it “a mistake”, some “disappointing”, and others, “a prudent move“.
Members of the BOE’s Monetary Policy Committee (MPC) voted by a majority of 8–1 to leave the rate unchanged and – unsurprisingly perhaps – its caution has provoked plenty of reaction.
Nigel Green, ceo of CEO of the independent financial advisory and asset management organisation, deVere Group said it was “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.”
Ryan Davies, strategy director at Bluestone Mortgages, said today’s decision would be a blow to borrowers across the country who were hoping for a further rate cut.
“Combined with a larger than expected drop in job vacancies and services inflation, the absence of a further rate cut may be seen as a missed opportunity,” he noted. “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.”
John Phillips, CEO of Just Mortgages and Spicerhaart estate agency, said the news was widely expected given the cautious approach the Bank of England continues to adopt.
“News of inflation remaining unchanged would have certainly been a relief for the central bank, but not enough for it change course and move to sequential cut,” he reasoned. “The Fed’s large cut last night wasn’t a big enough driver either, even with the central bank’s tendency to follow their lead. Nonetheless, sentiment continues to point towards the next cut coming in November, barring any surprises or potential shocks to the economy – either at home or from abroad.
“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. 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. The best brokers are already responding to this and are proactively positioning themselves to help clients navigate the market and seize opportunities.”
For Gareth Lewis, managing director of specialist lender MT Finance, the decision to hold rates steady reflects the reality of the current economic landscape.
“This is indeed a prudent move that signals stability,” said Lewis. “For property investors, this decision may create a stronger demand for alternative financing solutions such as bridging loans. A measured approach is key, and we anticipate that a rate reduction is on the horizon as inflationary pressures continue to ease.”
The US cuts its rate, the UK holds…
Despite fireworks over the pond with US interest rates being cut yesterday, the Bank of England’s decision to hold following its own cut six weeks ago reflects “a stubborn inflationary picture” here, said Ryan McGrath, director of second charge mortgages at Pepper Money.
Meanwhile, Kevin Roberts, managing director of Legal & General Mortgage viewed the decision as a continuation of the “thoughtful approach” shown by the Bank of England.
“The mortgage market remains primed for a strong final quarter,” observed Roberts. “We are seeing the return of sub-4% mortgage products for the first time since April, and supply is increasing, with the average number of available homes per estate agent at its highest since 2014. To take advantage of these opportunities, it is important for buyers or movers to sit down with a professional adviser to get the best possible deal. Brokers have access to a broader range of products and can use their experience to direct buyers towards rates, products and terms that work for them.”
Meanwhile, Nick Leeming, chairman of Jackson-Stops insisted the decision to hold rates steady was widely expected, but conceded that bringing down interest rates down would be a test of stamina not speed.
“Stubborn inflation over the summer months and Labour’s first fiscal statement fast approaching will no doubt be weighing on the market’s mind; the Bank has opted today to offer stability by exercising quiet caution,” said Leeming.
“While further cuts to the base rate would help to remove a number of obstacles for buyers and sellers, what the property market needs above all is certainty. A sensitive, gradual, adjustment to the base rate can offer that. We are already seeing greater levels of activity within the market, and house prices steadily increasing on a month-by-month basis.”
