There’s a question that’s been rattling around my head for a while now: what exactly is the Bank of England’s Monetary Policy Committee (MPC) waiting for when it comes to cutting the Bank Base Rate (BBR)?
Because, let’s be honest, they’re not going to be able to tackle the type of inflation we currently have with interest rate policy alone.
We’ve seen it time and time again — this inflation isn’t being driven by runaway domestic demand or consumers going on spending sprees fuelled by cheap credit.
It’s global factors, supply chain issues, energy prices, and geopolitical risks.
And yet, we seem locked into this holding pattern where the Bank feels like it is hesitating to move, and waiting for moments of reassurance.
Meanwhile, the mortgage and housing markets are left in limbo.
Rates have been edging down, yes, but slowly and painfully, and seemingly outside of the traditional realms of swap rates moving down, and product pricing following.
As we’ve seen in recent weeks, lenders have been cutting rates with no discernible moves in swaps.
Which leaves advisers constantly second-guessing market moves, clients potentially sitting on their hands, and lenders being much more active in terms of repricing, withdrawing and relaunching products.
It doesn’t have to be this way. The benefits of making multiple cuts to BBR over a short space of time are staring us in the face. It’s not about pushing rates back to pre-mini-Budget levels overnight, but a series of decisive actions would provide much-needed certainty and confidence.
Think of the impact that would have: affordability measures becoming even more palatable, monthly payments reducing, and crucially, those looking to remortgage or purchase feel confident enough to make decisions.
We know from our own experience how BBR cuts can act as rocket fuel for activity. And let’s not kid ourselves, the benefits wouldn’t just be felt in mortgage lending.
The property market would follow suit, transactions would increase, and the knock-on effect across industries tied to housing — from removals and conveyancing to home improvement and retail — would be significant.
But instead, we’re stuck with an ultra-cautious approach. And in such a volatile market, here’s my second big gripe: having MPC meetings every six weeks is simply too long.
The market moves faster than that. Swaps have the capacity to shift significantly in days, and yet we’re expecting both consumers and the industry to hang on for a month and a half to find out whether the Bank will make a call that, frankly, they could have made weeks earlier?
It’s not just frustrating; it’s outdated. In a world of real-time data, where global financial shifts can happen overnight, why are we stuck with a schedule that feels like it belongs to the 1980s?
Especially when these meetings have only recently moved from being much more frequent.
The Bank needs to be more agile, not just with decisions, but with communication and response times.
After the March decision to hold BBR, everyone now looks forward to May – with the suggestion being that a cut will happen then – but that is a long time to wait, and a long time for a relatively static market as borrowers also wait to see what happens next.
We see this lack of agility play out every day in our sector. Lenders scramble to adjust pricing off the back of market movements, advisers are left fielding questions they can’t possibly answer, and clients — the very people all this policy is supposed to help — end up bewildered and uncertain.
It’s time for a rethink. The Bank of England needs to act decisively and more frequently. Cut rates, and do it with intent.
Show the market they’re proactive rather than reactive. And perhaps most importantly, shorten the gap between meetings.
Eight times a year simply isn’t enough when you have a financial system this dynamic and sensitive.
Until that happens, advisers and their clients will continue to be left second-guessing and firefighting. And let’s be honest, that’s not good for anyone.
Sebastian Murphy is group director at JLM Mortgage Services, the mortgage and protection network
