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02/04/2025

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01/08/2024

Industry welcomes base rate cut with ‘huge sigh of relief’

Leah Milner
1 August 2024


Mortgage brokers, lenders and other property market professionals have welcomed today’s cut to the Bank of England base rate.

The rate has dropped to 5% after a year at a 16-year high of 5.25%.

Bluestone head of sales and distribution Mark Hollands says: “Would-be and current borrowers across the country will no doubt be letting out a huge sigh of relief following today’s much-anticipated decision, as rates fall from their historic 16-year high.

“This move should boost consumer confidence and help stimulate activity in the mortgage market.”

Building Societies Association head of mortgage and housing policy Paul Broadhead says today’s rate decision “marks a turning point in what has been a very difficult two and half years” and agreed it would be a confidence boost, stimulating the housing market.

‘Affordability boosted but pressure remains’

SPF Private Clients chief executive Mark Harris says: “Finally, the Bank of England has made its much-anticipated move and cut interest rates from a 16-year high.

“This will give borrowers an affordability boost, ease pressure on household finances and in doing so, assist the wider economy.

“Even if the new Labour Government manages to magic up an additional 300,000 homes this year, there is still a serious affordability issue for first-time buyers.

“Any base rate reductions will be passed on via lower standard variable rates and to some extent headline rates, which will have a positive impact on borrowing boundaries.”

‘Rate cut already priced in to some extent’

Harris adds: “This rate cut has already been factored into mortgage rates with numerous lenders reducing their fixed rates in recent days on the back of declining Swap rates, with a sub-4 per cent five-year fix now available for new purchases.

“The next question is when the Bank will reduce rates again, and whether we will see another cut in September or November.”

North London estate agent and former Royal Institution of Chartered Surveyors residential chairman Jeremy Leaf says: “In our view, when the interest rate decision has been so close to call it means the impact on the market will be relatively minimal one way or the other.

“Of course, some buyers have been holding off in anticipation of a cut for some time but mortgage rates’ have been softening over recent weeks anyway.

“This reduction in rates to 5 per cent will certainly act as a shot in the arm for activity and buyer affordability over the short term at least, complemented by a strong employment picture.”

‘Knock-on impact on house prices’

Richmond estate agency Antony Roberts head of sales Amy Reynolds says: “In our offices, we have been hearing increased talk about the prospect of interest rates falling, with vendors hoping and buyers wishing that this will happen imminently.

“However, buyers need to be careful what they wish for as cheaper mortgages will almost certainly mean higher asking prices.

“If we see a flurry of new applicants coming back to the market, encouraged by cheaper mortgage rates, then these higher prices are likely to be achieved.”

‘Falling mortgage rates to continue, but long-term average will settle higher’

Rightmove mortgage expert Matt Smith says: “While those looking to take out a mortgage soon shouldn’t expect to see drastically lower mortgage rates, we would expect the downward trend we’ve started to see to continue.

“This sets us up for hopefully further cuts to come, and when we have seen further reductions to the Base Rate, people should really start to see the impact.

“However, it’s important to keep in mind that mortgage rates are widely expected to eventually settle at higher levels than previously, with the market view that the base rate may eventually fall to about 3.25%.”

22/05/2024

BoE should cut rates by up to 0.75% in 2024: IMF
Roger Baird
21 May 2024

The UK should cut rates up to three times this year to continue the economy’s “soft landing” out of a mild recession, says the International Monetary Fund.

It says the Bank of England should reduce rates by “about 50 -75 basis points” in 2024, to unshackle the country’s recovering economy after the UK emerged from a technical recession earlier this month.

“Keeping Bank rate constant as inflation, and inflation expectations, fall would raise ex-post real rates, which could stall or even reverse the recovery, and lead to an extended undershooting of the inflation target,” the world economics body said in its latest review of Britain’s finances.

Its report comes as UK money markets expect official data to show tomorrow that general prices over the year to April, fell sharply from 3.2% to close in on the Bank’s 2% target.

Deutsche Bank forecasts UK inflation will come in at around 2.2% over this period, largely driven by a sharp fall in energy prices.

The base rate has been stalled at a 16-year high of 5.25% since last August. A cut would be the first reduction in over four years, with the last coming in March 2020.

But official data earlier this month showed that the UK expanded by 0.6% in the three months to March, the strongest quarterly growth since the fourth quarter of 2021.

This brought the country out of a short recession it stumbled into at the end of last year.

The IMF says: “With growth recovering faster than expected, the UK economy is approaching a soft landing, following a mild technical recession in 2023.”

The MPC, at its last meeting, forecast inflation would fall below 2% in the second quarter of the year, before rising in the second half, pushed up by higher fuel costs and wage settlements.

The IMF says: “The MPC has highlighted the need to see through regulated energy price base effects and wait for clearer signs of receding inflation persistence to guard against the risk of premature easing.”

But the body adds: “As monetary policy reaches an inflection point, the timing and pace of rate cuts must carefully balance the risks of premature and delayed easing.”

The IMF forecasts the UK will grow by 0.7% in 2024, up from a 0.5% expansion predicted in its April report.

Chancellor Jeremy Hunt welcomed the news in a period when the government had to take “a lot of very difficult decisions”.

He adds: “Today’s report clearly shows that independent international economists agree that the UK economy has turned a corner and is on course for a soft landing.”

15/11/2023

Today's mortgage rates could look very good in a few months
Article from This is Money

Anyone inclined to give the government credit for today’s fall in inflation might wonder how much better they could have done were they not a squabbling bunch of reshuffled egos who plainly can’t stand each other.
The housing crisis would be solved. The NHS a gleaming model of how to do health care. International wars; what international wars?
The more prosaic truth is that inflation is out of its control in either direction. There’s not a lot it or the Bank of England could do about the energy shock that followed Russia’s invasion of Ukraine. Nor about the entirely depressing Israel/Gaza situation.
Rishi Sunak’s bet was that electricity and food price pressures would ease in time for Christmas. They haven’t stopped going up remember, they are just rising less quickly.
Today he gets to say he won that bet and given his luck in general, let’s allow him to bask in that for a bit.
An obvious extra boost is that the Monetary Policy Committee at the Bank of England now has no need to ramp up rates beyond the present 5.25%.
The three members who voted to do so at the November MPC meeting -- Megan Greene, Jonathan Haskel and Catherine L Mann – are today locked in their offices, avoiding colleagues who thought they looked out of line then and miles off the pace now.
From a practical point of view, if you are presently renegotiating a mortgage deal the best move must be to crack on.
Yesterday Halifax, HSBC and First Direct all offered newer, better deals. Halifax is offering a 5-year fix for borrowers with a 40% deposit at 4.53%.
Those aren’t the super cheap 2% deals of old. But they aren’t bad and will certainly look like good offers if there is another energy shock and inflation returns with vengeance.

30/06/2023

18/12/2021

Bank of England brings base rate up to 0.25%
By Gary Adams 16th December 2021 12:34 pm

The Bank of England (BoE) has increased the base rate from its historic low of 0.10% to 0.25%.

The Monetary Policy Committee (MPC) voted 8-1 for the first increase since August 2018.

Many market watchers believed the MPC would wait until the start of 2022 to raise rates, especially after it defied expectations in failing to do so last month.

The MPC minutes show that GDP expectations for the final quarter of this year have been revised down by half a percentage point since November, with blame lying in supply chain disruption, labour shortages and, to a certain extent, the Omicron variant.

It explains: “The experience since March 2020 suggests that successive waves of Covid appear to have had less impact on GDP, although there is uncertainty around the extent to which that will prove to be the case on this occasion,” the MPC says.

Yesterday, figures showed the annual Consumer Price Index inflation at 5.1%, the highest reading since September 2011.

This requires BoE governor Andrew Baily to write a letter to the treasury explaining why inflation has exceeded its 2% target. Supply chains and labour forces are mentioned, along with inflation in accommodation and catering services and rising energy costs.

In the letter, Bailey adds that inflation will likely peak at “around 6%” in April 2022, “one percentage point higher than expected in the November 2021.”

Earlier this month, a survey carried out by the BoE showed that the public is losing confidence in its approach to inflation, and has been doing so over the last three quarters.

The MPC minutes add that the unemployment rate had fallen to 4.2% in the three months to October, and is expected to tick further downwards to 4% in the final quarter of this year, lower than the 4.5% predicted.

“There was little sign in the available data that the closure of the Coronavirus Job Retention Scheme at the end of September had led to a weakening in the labour market,” the MPC cheers.

Knight Frank Finance managing partner Simon Gammon says: “By raising the base rate it’s clear that the BoE believes the economy will shrug off most of the effects of Omicron.

“Getting a grip on rising inflation appears to be the number one priority. Mortgage rates on the high street have been edging upwards during recent weeks in anticipation of this moment and it’s clear the lenders believe there could be at least one more hike in the base rate next year.”

And Fine & Country managing director Nicky Stevenson comments: “While a rate increase has been clearly signposted for some time, many will be surprised that the move has come just days before Christmas, and amid the current uncertainty caused by the spread of the Omicron virus.

“However, such a minor increase isn’t going to impact the property market significantly. Currently, more than three quarters of homeowners are locked into fixed rate deals, so will be unaffected for the time being.

“The real significance of this rise surrounds whether it marks a genuine change in direction for the BoE but that won’t be known for some time. The pace and frequency of rate rises is the big unknown but this move will focus the minds of borrowers on extending the length of the fixed rate deals they lock into.

“The markets are currently pricing in further increases to around one per cent before the end of next year. This is unlikely to knock the housing market completely off balance.”

Habito chief finance officer Martijn van der Heijden gives a run-down of what to expect regarding further rises: “The MPC hints at this in its statement by warning that ‘tightening of monetary policy over the forecast period is likely to be necessary’.

“Economists had already forecast a second rise to 0.5% in spring 2022, hitting 1% by the end of 2022. The Office of Budget Responsibility has predicted that rates could reach 3.5% by 2023. This means we may be seeing the beginning of the end of the era of record-low interest rates.

“If so, a rising base rate environment is something many homeowners have never experienced. Anyone who’s bought a home in the last 12 years has only ever had a mortgage during a time when base rates were 1% or below.

“Given that 74% of UK homeowners are on a fixed rate deal, any discomfort from today’s base rate rise will be felt in the future, when their current deal ends. However, the concern is that if the bank does need to raise rates several times over the next 12 to 24 months, when homeowners do come to remortgage, prices could be much higher than where they are now.”

“A small step in the right direction, hopefully to be followed by others in 2022,” posted former MPC member Andrew Sentance on Twitter.

18/12/2021

Lender loosens BTL rental income cover
By Roger Baird 17th December 2021 2:57 pm

A lender has loosened its lending criteria for UK buy-to-let mortgages for overseas residents.

The Guernsey-licensed bank says the change in criteria, which comes into effect immediately, allows rental income cover to be 110%, rather than standard 125%, on loans over £250,000.

It adds qualifying applicants must earn over £100,000 a year, and debt to income ratios must come in at under 20%.

The maximum loan to value remains at 75%, and the offer is only available on the basis of one facility per client at 110%.

The bank says for a property valued at £1m, with a rental of £2,250 per month, based on its current five-year fixed rate of 3.24%, additional borrowing of £83,400 may be available.

It adds that it stress tests BTL applications at 5.50% on base rate tracker products and at the payrate on five-year fixed-rate products, for which the rental income is required to be 110%.

Business development manager Roger Hughes says: “The reduction in rental income cover means Skipton is able to account for more of the rental income than previously, which could potentially lead to enhanced lending.

“The UK property market remains in pretty good shape and, while some uncertainty remains, the fears of Covid-19 resulting in mass unemployment, recession and falling property prices have abated.

“Customers meeting the criteria will now have their mortgage application assessed at 110% of the annual rental income on our three-year base rate tracker, at 5.5% stress test, or at the payrate on any five-year fixed rate. This, therefore, gives greater borrowing capacity against their rental yield.”

15/06/2021

** Trigger Warning **

Lets talk about Life and Critical Illness cover.
Recently in a Euro 2020 match a fit and healthy player collapsed on the pitch with a serious condition at the age of 29 years old.

The point of this post is to spread the awareness on how important life and Critical illness cover is for you and your family. Never in a millions years did that player wake up in the morning thinking this would happen but it did! He is more active than a lot of other 29 year olds I know. It also shows us that 'It can happen to you' no matter how young and healthy you are.

Although as a mortgage and Protection adviser, I am not able to protect people from death (I wish I could) I am able to help protect peoples family from the financial loss that comes from illness or death.

The service I offer:
+ As an adviser with 13 years experience I can help you look at life cover, critical illness cover and income protection.
+ No fee advise on protection
+ No obligation advice and quotes
+ Cover to protect your mortgage or rent
+ Family protection or Funeral costs covered