Following today’s inflation announcement by the Office for National Statistics (ONS), many financial experts have shared their predictions regarding the upcoming Monetary Policy Committee (MPC) meeting in August.
ONS reported that the UK inflation rate decreased by 0.8% for the month of June, coming in at 7.9%.
Despite 13 consecutive interest rate hikes, and the subsequent havoc caused within the financial markets, many said that this pointed to a slow recovery for the mortgage sector.
Below are some industry reactions and predictions for what the Bank of England has in store over the coming few weeks.
Reaction:
Adam Walkom, co-founder at Permanent Wealth Partners:
“Finally, some mildly positive news on UK inflation this morning, giving pause to the relentless bad news over the past 12 months.
“Unfortunately, one swallow does not a summer make, so the Bank of England will want to see a clear trend of falling inflation, especially at the core level, before even considering a pause on rate hikes.
“The burden on individual mortgage holders is secondary to the Bank of England’s fanatical mission to get inflation back to 2%.”
Kirsty Wells, director of Blueprint Mortgages:
“Following Wednesday’s inflation data, let’s hope the Bank of England doesn’t increase the base rate as much as previously expected at its next meeting.
“However, I still think we will see a 0.25% increase in the base rate next month.
“This is unfortunate as many mortgage holders are already under immense pressure and so many people are panicking with rising mortgage rates and general living costs.
“As inflation is now coming down, mortgage rates need to start doing the same.”
Rob Gill, managing director at Altura Mortgage Finance:
“There’s been a distinct whiff of panic about the relentless rise in UK money market and mortgage rates in recent weeks, based on fears UK inflation would remain stubbornly higher than other developed nations and require a higher base rate for longer.
“Now UK inflation is finally falling, interest rates could start to reverse equally sharply.”
Wes Wilkes, CEO at Net-Worth Ntwrk:
“Despite the lower than expected inflation numbers today, they are still four times the Bank of England’s target.
“This may be enough for them to justify another 25bps rise in the base rate in August but the likely sharper fall in inflation mid-August could lead to a pause as we see how the numbers develop.
“The market looks to be pricing in a lower terminal rate already.”
Mike Staton, director of Staton Mortgages:
“This is better than expected and hopefully is the start of a downward trend. We should start seeing more stability from lenders and this may encourage them to reduce the knee-jerk reaction and high rates we have seen over the past couple of weeks.
“Whilst this is great news for the mortgage industry, more work needs to be done by the government to lower inflation.
“I have not seen one action from them to assist the country in reducing this figure. If Rishi Sunak is a financial stalwart, then I’m a Premier League footballer.
“It’s about time he stepped down. His tenure has to be considered as successful as that of Liz Truss. How Rishi has kept himself in a job is beyond me. He’s a spectator watching the world’s biggest circus and the Tories are the clowns.”
Craig Fish, managing director at Lodestone:
“Based on previous decisions, I fully believe the Monetary Policy Committee will continue with its unproven approach and increase rates further.
“The hope would be that they pause for breath until after the August inflation figures are released, as they are announced after the next MPC meeting, but I very much doubt it and I expect a 0.25% increase in the base rate on 3 August.”
Peter Dockar, chief commercial officer at Gen H:
“It’s a rare bit of good news, which means we should see a slowing in the relentless increase in mortgage rates.
“We may even see some lenders reduce rates a little off the back of it. However, the markets and investors remain concerned about the UK Government’s longer-term challenge with this.
“You can see this in gilts, which are the Government’s cost of borrowing. So, it is good news, but one swallow – or one piece of inflation data – doesn’t a summer make.”
Stuart Crispe, founder at Sunny Avenue:
“I’m a big believer in confidence and I think the Bank of England has hammered the base rate point enough now. Confidence is low, misery has already arrived.
“The Bank of England made base rate changes in May and June, so right now they simply need to hold and let the data feed through for the next two months before making any knee-jerk decisions either way.”
Peter Stamford, director of Moor Mortgages:
“If you looked at monthly data for the number of people buying sunglasses and compared it to the number of people being stung by wasps, you would find they align quite tightly. Does that mean wasps target people wearing eye protection?
“No, it’s just they are more common in hotter months. This is correlation not causation. The Bank of England should not automatically assume that, because inflation is falling, it’s their tactic of raising interest rates month-on-month that has been the cause.”
Amit Patel, adviser at Trinity Finance: “Given the positive news this morning that inflation has dipped it would be prudent for the Bank of England to pause increasing the base rate at the next meeting.
“However, I don’t think they will and we can expect an increase of 0.25%, which will inflict further pain and misery on ordinary households.”
Rohit Kohli, director at The Mortgage Stop:
“I do not think this drop in the rate of inflation will be enough to dissuade the Bank of England from more rate rises.
“They have looked weak and indecisive so I don’t in any way see them reducing interest rates until inflation drops significantly closer to the 2% inflation target.
“I expect a further rate rise, maybe another 25 basis points to capitalise on the groundwork they have laid down over the past few weeks.
“I hope that we see some stability, as this will do much to restore confidence in businesses and the housing market.”
Riz Malik, director of R3 Mortgages:
“A minor rate increase is now likely in early August. However, should the Bank of England maintain rates at their current level, we might be on the brink of a pivotal moment.
“If the inflation data for August — which accounts for July’s energy price dip — continues on a downward trajectory, we might see a pause in the aggressive rate hikes.
“Given their understanding that it takes a while for their actions to permeate the market, and after enduring 13 gruelling increases, the Bank may deem it enough in light of the recent data.”
Elliot Cotterell, director of Windsor Hill Mortgages:
“Inflation is down to 7.9% but I don’t think this is quite enough to convince the Bank of England to take its foot off the pedal at this point.
“We can certainly take the little wins where possible as this will have an impact on lenders’ decisions.
“However, I don’t think this is quite enough to stop a further increase in the base rate as this appears to be the only tool at the disposal of the Monetary Policy Committee.
“The next Monetary Policy Committee meeting is on the 3rd of August and the market has set the probability to 58% for a 0.5 bp rise and others believe this will be limited to a 0.25 bp rise.W”
Ranald Mitchell, director of Charwin Private Clients:
“Good to see some more positive inflation figures today, but there is a long way to go. It does show that base rate increases are starting to have the desired effect. We remain massively over the 2% target and I don’t expect any easing up in base rate increases until inflation reaches targeted levels. Encouraged by the reduction in inflation, Threadneedle Street will likely go for the kill, and push another 0.5% on rates to continue to batter down stubborn inflation.”
Graham Cox, founder of SelfEmployedMortgageHub:
“With inflation now falling, it’s time for the Bank of England to take its foot off the pedal and stop raising the base rate.
“In my view, the MPC haven’t given nearly enough time for the last four or five base rate rises to have an effect. We’re already likely to be heading into a recession, so further hikes at this point would only make it more severe than necessary.”
Lewis Shaw, founder of Shaw Financial Services:
“I expect the Bank of England to want to consolidate today’s positive inflationary data with a further rise of 0.25% to ensure it’s not an anomaly and they’ve caught the inflationary tiger by the tail.
“Moreover, it’s almost certain that on 16th August, the next release of the CPI data will show another reduction as energy costs have fallen this month after Ofgem dropped the price cap following tumbling wholesale prices.
“So, perhaps we could see a hold at the MPC meeting in September and, maybe at 5.25%, the base rate has hit its peak. However, only time will tell.”
Justin Moy, founder at EHF Mortgages:
“The positive news about inflation confirms that costs are slowing down, but are still high compared to this time last year, so I think the Bank of England will continue to push rates upwards.
“I expect a 0.25% increase in August and a further 0.25% in September, assuming inflation continues to fall at the same rate, so 5.5% may be as far as the base rate goes.
“We expect to see a little bit off swap rates in the next few weeks, not wholesale changes to pricing but enough to give us all some confidence as we head into the latter stages of the year.”
Scott Taylor-Barr, director of Barnsdale Financial Management:
“It’s the question everyone is asking and it’s a thorny issue for the MPC to debate at their next meeting.
“There are certainly going to be members calling for a further rise, as they see this as the medicine working, whilst others will be wanting to hold and see if the current rate will continue to see inflation fall, without having to incur any further pain on mortgage borrowers.
“The base rate decision has many moving parts and the MPC will have to be considering all of them; the housing market, construction and connected professional services are just the tip of the iceberg.
“The base rate also affects business and their desire to grow and make capital investments and recruit additional staff to fuel growth, so if the Bank gets it wrong they could constrain this too much and see companies put growth plans on hold and even lay off staff.
“It’s a delicate balancing act given all the potential impacts on the economy.”
