Credit, Collections & Insolvency News
The Bank of England has opted to hold the base rate at 5.25%, this marks the seventh consecutive meeting where the Monetary Policy Committee has opted against raising or cutting interest rates.
The MPC voted 7-2 to hold rates steady, with the dissenters preferring a cut of 0.25% to 5.0%. The decisions follows the announcement that inflation hit 2% in May, but could rise again in the second half of this year.
Commenting on the announcement, Jane Tully, Director of External Affairs at the Money Advice Trust, the charity that runs National Debtline, said “As interest rates remain steady, many homeowners are feeling the strain of significantly higher mortgage repayments. For those nearing the end of fixed-rate deals this year, the challenges are far from over.
“I’d encourage anyone facing difficulties paying their mortgage to reach out to their lender for support – they can offer more support than many people think.”
Paul Broadhead, Head of Mortgage and Housing Policy at the Building Society Association said “With inflation dropping to almost the 2% target, many mortgage borrowers might have been hoping for a cut in the Bank Rate today. The decision to keep rates at 5.25% will be very disappointing news for them, as well as those looking to buy their first home.
“With two of the nine members of the Monetary Policy Committee voting for a cut today, it is clear that some are holding out for more overwhelming evidence that inflation can consistently stay at or close to the target.
“We still anticipate the Bank Rate will reduce this year, however this is happening much later and slower than we had anticipated earlier in the year. Homeowners who are coming to the end of a fixed-rate mortgage this year, will need to prepare for an increase in their mortgage payments”
Katie Pender, Managing Director of Target, said “With the inflation target of 2% met, some might be disappointed that the Bank of England has not reduced the bank rate today. However, the decision to hold the rate in a pre-election period was to be expected. The Bank is no doubt now waiting to see the outcome of the General Election before making a cut and the market will be watching what happens at the next MPC meeting in August closely.
“But the bigger structural question remains: will the next Government be bold enough to make the badly needed, big changes to the broken housing market? In the meantime, we can play our part by working to support lenders and borrowers with the latest technology that is essential to speeding up decision-making and improving customer satisfaction.”
Paul Heywood, Chief Data & Analytics Officer at Equifax said “Today’s decision to keep rates on hold was unsurprising amid the general election fever and a cautious stance from the Fed last week.
“Even with a future base rate cut in sight, high interest on borrowing and cost of living pressures will persist for some time. So far consumers have successfully adapted their spending habits to weather these challenges, with mortgage arrears growth easing in recent months. However, there are still signs of stress in the system with credit card debt up 8% annually.”
Ben Allkins, Head of Mortgages and Protection at Just Mortgages, said “If there was ever a time for the Bank of England to finally pull its finger out, this was certainly it. Yet, in spite of inflation finally reaching the illusive 2% target, and recent GDP figures showing a flatlining economy, the MPC is still watching and waiting.
“While we can be encouraged by positive levels of buyer registrations and requests for valuations and appointments, a cut today would have been a real adrenaline shot to help carry us through a summer full of potential distractions – particularly with a general election. For now, we just have to hope swap rates react favourably to further stability in the base rate, giving lenders some wiggle room to reprice.
“With potential borrowers still desperately trying to navigate the market and deal with clear affordability challenges, brokers must stay visible and proactive, highlighting the wealth of options out there to support all types of borrower, as well as the cash that is still available from lenders willing to lend.”
Simon Webb, Managing Director of capital markets and finance at LiveMore, said “The Bank of England’s decision to again hold the base rate at 5.25% comes as no surprise, continuing the bank’s trend of following market sentiment instead of steering it.
“Unfortunately last week’s manifestos also offered little stimulation to help older borrowers. The Conservatives’ pledge to increase the threshold at which first-time buyers pay Stamp Duty to £425,000 from £300,000 offers no support for older buyers, effectively trapped in their homes. If stamp duty was lifted for all buyers up to this threshold it would enable older borrowers to downsize, freeing up larger homes for younger borrowers.
“The Labour pledges similarly fail to address older borrowers’ needs despite the very real fact that we have an ageing population, with over 20 million people currently over 55.”
Andy Mielczarek, CEO of Chetwood Financial, said “It was pleasing to see the Bank of England double down on its previous decisions to hold interest rates at 5.25%. Leaving the rate at the same level for the seventh consecutive time shows that the battle against the cost-of-living crisis endures, and now is not the time to jump the gun.
“Despite inflation reaching the Government’s 2% target, prices remain extremely high, and the Central Bank clearly feels that any reduction in the rate could spark a fresh spike in inflation. And while Britons looking to reduce their mortgage repayments might have been expecting better news, they should gain confidence from the stability provided by the Bank of England and the positive economic markers.
“Ultimately, it won’t be long before the Bank of England makes the call to cut interest rates, and when they do, many flexible savings offers will have their rates slashed. Now is the time to consider investing in longer-term, fixed-rate deals that lock in high interest while at their peak.”
Richard Carter, CEO of Lenvi said “Following yesterday’s inflation announcement, hitting the Bank of England’s 2% target, borrowers may feel disheartened that interest rates have remained at 5.25% for yet another month – after the BoE steadily increased rates since 2021 in an effort to bring down inflation.
“For the 1.6 million UK homeowners whose mortgage fix will be coming to an end this year1, most will have been hoping to find a better outcome.
“However, a cut in interest rates is now more likely to occur following the next meeting on 1 August. First time buyers haven’t had much good news so far, but the start of rate cuts should make their path to home ownership that little bit less arduous.
“Lenders need to continue to show patience and understanding to potentially vulnerable customers who are looking to borrow or going through the stressful process of buying a home during this turbulent time.”
Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown said “The Old Lady of Threadneedle Street is not for turning, and is still training a beady eye on hot prices in parts of the economy, even though headline inflation has hit the 2% target. There is not sufficient data yet in the bag to prompt more members of the MPC to vote for an interest rate cut, but hopes are now building that one may come in August.
“Seven voted for the rate to be held, amid concerns about persistently high services inflation, with just two calling for a cut, just like last month. However, for some policymakers it was a finely balanced decision, an indication that they could be swayed in August.
“While it’s clear from the latest economic snapshot from the ONS today that disinflationary forces have built up across the economy, with vacancies falling and consumers more cautious about spending, some policymakers are still a bit worried this trend may run out of steam, especially if wage growth stays stubborn. Bets have increased now that a rate cut will come in August, but financial markets are still not fully pricing in a rate cut until September.”
Sarah Coles, Head of Personal Finance at Hargreaves Lansdown said “It’s yet another kick in the teeth for those on variable rate mortgages, who’ve been holding out for a rate cut for almost a year. They’re still likely to get a cut in August or September, and possibly two by the end of the year, but that’s not going to move the dial anywhere near as much as they will have expected when they remortgaged onto a variable deal in the hope that rates would fall swiftly and often.
For those who need to remortgage in the near future, rates have actually risen fractionally since the last MPC meeting – with Moneyfacts showing the average two-year fixed rate has risen from 5.93% to 5.97%. It’s only a tiny change, but given how many people are holding out for a cut, it’s a gut punch. They might have hoped that the prospect of the first rate cut in the next few months would bring some hope. However, with only two pencilled in for the next six months, even more of the 1.5 million people remortgaging in 2024 could see their mortgage payments double.”
