And, given the closeness of the vote – 5-4 – we were probably right to be hedging our bets about a 0.25% cut. Particularly as we have another Monetary Policy Committee (MPC) meeting in September, and the members might well have felt justified in waiting until the summer was over and the lay of the land was a little clearer, especially as we have a new government in power. 

This decision to cut just weeks into the new Parliament will no doubt leave many political commentators scratching their heads about why Rishi Sunak chose to call an election ‘early’, but that is perhaps a question to ponder in the months and years ahead rather than right now.

Certainly, the incumbent government is likely to make the most of this ‘good news’, even if, as seems likely, this does not open the floodgates to multiple rate cuts through the rest of 2024. 

 

Things are looking up 

While a BBR cut from these high levels is certainly to be welcomed, Andrew Bailey, the governor of the Bank of England, almost immediately sought to temper expectations that further rate cuts were coming over the course of the next few months. 

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However, product rates have already begun to shift and, it will not be lost on any of us that we are almost two years on from the mini Budget and the significant spike in rates we saw then, with lenders also pulling hundreds of products in the immediate aftermath. 

To have moved on from that debacle feels like a real moment, as does the feeling that BBR has peaked, and we should hope for multiple rate cuts, perhaps not in 2024, but certainly throughout 2025. 

For those who have viewed the mortgage market over the last couple of years from behind their fingers, the notion that it might be ‘okay to look again’ is another major positive. 

Not just for those who had to remortgage two years ago in a period of ‘Truss-o-nomics’, but also those wannabe new buyers who will have been priced out of the market, not necessarily by the cost of the home but the cost of the mortgage. 

 

A brightening outlook for potential first-time buyers 

Affordability moving in the right direction due to falling rates should hopefully reignite interest among would-be first-time buyers, particularly those who have been waiting for their moment and wondering when that rate peak would be reached to allow them to weigh up their options once more. 

The good news is we already have some high-loan-to-value (LTV) products available at prices below 5% as a result of the rate cut. My expectation is that more lenders will follow in the weeks ahead, especially when they weigh up the fact that, last year, first-timers were the biggest buying demographic, and this year is likely to be the same. 

For the sector, the point now is all about offering a range of products and rates that act as an open door for those who want to get on the ladder, and certainly in that respect, the more higher-LTV products the lending community can bring to market, the better. 

 

Still room for more innovation 

As of this week, we’re looking at about 350 95% LTV products available for first-time buyers. 

However, this borrower demographic would also benefit from 95%-plus products, and lenders can use risk mitigants such as private mortgage insurance to get these ‘over the line’. 

Plus, it would be nice to think we can have a rethink, or tweak, of the current regulatory rules on high-LTV lending in order not to have these artificial caps on the business lenders are able to write. 

What was right for the immediate period post-financial crisis seems to be overkill in today’s market, and there’s no doubting that if Labour get anywhere near to hitting their affordable new home target, then we’re going to need to have more lenders offering greater levels of high-LTV lending to allow individuals to buy these homes.

Overall, this does feel like a positive step forward, but we need to match BBR cuts with lender appetite, match housing supply growth with the mortgages to buy, and ultimately match new buyers with their first properties.