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Ben Allen, Managing Director of The Right Mortgage & Protection Network:
“The decision to maintain Bank Base Rate at 3.75% is welcome, particularly as there had been a growing expectation in recent weeks that the MPC might have felt this was the time to act. Inflation rising from 2.9% to 3.1% in August was in line with expectations, and some of that increase was driven by higher motoring costs, particularly fuel, so the Committee has clearly concluded there is not yet sufficient evidence that these inflationary pressures require another increase in BBR, or indeed that any rise would actually work in terms of bringing inflation down to target. However, the inflationary risks have certainly not disappeared, particularly from the two ‘W’s’ of war and weather, with the continuing US-Iran conflict creating uncertainty around energy, shipping and consumer goods costs, while adverse weather conditions affecting crops could continue to feed into food price inflation. If we have avoided a rise today, there will inevitably be a question over whether it has simply been postponed.
“For the mortgage market, however, today’s hold feels slightly irrelevant because change is taking place anyway. Swap rates and lender funding costs have risen, mortgage rates have been moving upwards and the widespread product price reductions we saw earlier in the year have become something of a distant memory, with some lenders having to reprice more than once in a week and advisers working increasingly hard to meet product/rate withdrawal deadlines for their clients. Lenders have to react to their own funding costs, but those continuing to give advisers meaningful notice of changes deserve credit because it makes a significant difference in such a fast-moving market. Maintaining BBR at 3.75% at least avoids adding further pressure to borrowers on tracker, discounted and variable rates, but attention will now turn to swaps, the future inflation outlook and, of course, the Budget next month and accompanying OBR forecast, as the country waits to see what those might mean for households, the economy and ultimately the mortgage market.”
