With inflation steady at 2.8% and Middle East uncertainty easing, intermediaries say the Bank made the right move
Brokers have welcomed the Bank of England's decision to hold Bank Rate at 3.75%, but warned clients not to expect rate cuts any time soon, with several pointing to stamp duty reform and lender pricing as the real levers that could unlock the housing market.
The Monetary Policy Committee (MPC) voted seven to two to hold, with two members pushing for an immediate increase to 4%. According to the Office for National Statistics (ONS), UK consumer price index (CPI) inflation held steady at 2.8% in May, below the Bank's own projections.
Sebastian Murphy (pictured top left), group director at JLM Mortgage Network, told Mortgage Introducer the Bank has done exactly what it signalled it would.
"Andrew Bailey and Sarah Breeden have said in the last four weeks to anybody who listened we were on a rate cutting cycle. We have paused that. We're going to look to see what comes from the situation in the Middle East and its effect on the market. But when we can, we will look to resume cutting rates."
Murphy pointed to inflation data that had defied the more alarmist predictions doing the rounds in recent weeks.
"Virtually every large broadsheet was saying inflation was going up to 3% or 3.3%. And they said that for the last eight weeks. When the reality is, we've seen a big dip in gas prices over the last couple of months, which again has not been reported because it's not good news."
Katherine Stagg (pictured top middle left), managing director of Stagg Mortgage Services, told Mortgage Introducer the hold was the right call, but the more pressing question was what comes next.
"It's good that it was a hold again. I know two of them wanted to push for an increase, which I don't think is the right time. But we've got to get this purchase market moving because if not, we're not going to go anywhere with it."
What does the hold mean for broker confidence?
Harry Arnold (pictured top right), director at Anderson Harris, told Mortgage Introducer the decision was welcome, but he cautioned that mortgage rates would remain higher than many had hoped for at the start of the year.
"The market is slower than it would have been had there not been this uncertainty around interest rates. We thought we might have a base rate of 3.5% or maybe even 3.25% by now. Those cuts aren't going to come, we don't think, this year."
Arnold said brokers should steer clients away from timing decisions around rate movements and towards their own personal circumstances.
"We would always counsel clients to think more about whether it's the right time for them to move or to do the work on the house they want to do, rather than be whipsawed around by world events."
Murphy said well-run intermediary firms had been offering clients a choice between fixed-rate products and variable rate trackers throughout the period of uncertainty, and that the hold had proved that approach to be right.
"Good intermediaries who have offered these two options with sensible advice, laying out the pros and cons and the risks of both, are now sitting there going, ‘Actually, yeah, we've done the right thing’. We've seen a big spike in variable rate early repayment charge-free mortgages."
Stagg agreed the hold brought a degree of certainty, and said clients sitting on the fence needed honest counsel rather than false hope.
"I just think we need to be honest with them and say this is what it's going to be like for a while now. Unfortunately, with the war and everything, we've just got to carry on and do what we can do and get first-time buyers into houses."
Purchase market outlook
Guy Nyirenda (pictured top middle right), head of commercial and specialist lending at Altura Mortgage Finance, told Mortgage Introducer the hold would support lender rate reductions and expected further cuts to follow quickly.
"We've seen various rate drops over the last week or so and we'll probably see some more come through today. It will certainly help some clients with moving forward and applying for mortgages."
Stagg said lender cuts were already making a difference on the ground, and pointed to first-time buyers as the group most in need of continued momentum.
"The lenders are reducing rates and that is helping. If we can get more rate reductions from lenders, which we are seeing, that would help first-time buyers and movers moving forward. We just need to give them that help."
Nyirenda pointed to the remortgage pipeline as a particular source of confidence for the second half of the year.
"There's quite a large remortgage market coming with long-term fixes ending this year, so lots of optimism on that side."
What would it take to get the market moving?
Murphy pointed to stamp duty as the single biggest structural barrier and said the government needed to act.
"If they get stamp duty right at the top end with people downsizing, and at the bottom end, it will basically create the social mobility the government needs and what the country wants."
He also called for an overhaul of how lenders assess self-employed income, arguing the current approach was decades behind the reality of the modern workforce.
"We're no longer a nation of shopkeepers. We're now a nation of contractors and self-employed individuals and limited company directors. The way we assess income for self-employed is still crazy, still looking back 18 months, two years, when what we should be looking at is what the client has earned in the last three to four months, the same as you would do with anybody who's employed."
Stagg echoed the need for broader incentives, highlighting cashback schemes and solicitor fee support as practical measures that could unlock hesitant buyers.
"More initiatives, more cashback schemes so they don't have to pay the solicitors fees. And maintaining the base rate has helped, definitely. It's just getting the rates reduced slightly."
Nyirenda added that buy-to-let investors were watching how the Renters Reform Act would bed in, and that clarity there would help drive activity in that segment.
"Seeing the effect of the Renters Reform Act coming into practice – once that's a bit more settled – will help things forward."
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