Dismal week for data as UK GDP flatlines in April, ending positive spell of growth

Dismal week for data as UK GDP flatlines in April, ending positive spell of growth

The UK’s monthly real GDP is estimated to have shown no growth in April, following growth of 0.4% in March.

GDP measures the value of goods and services produced in the UK. It estimates the size of – and growth in – the economy.

The nil growth ends a spell of positive output recorded in the months after the UK dipped into a “short and shallow” recession at the end of 2023.

According to the Office for National Statistics (ONS), services output grew by 0.2% in April, its fourth consecutive monthly growth.

However, this was offset by a 0.9% fall in production output, following a 0.2% decline in March.

Meanwhile, construction output fell by a higher 1.4% in April, marking its third consecutive monthly decline.

However, the ONS noted that real GDP is estimated to have grown by 0.7% in the three months to April 2024, compared with the three months to January 2024. Service also grew by 0.9% in the quarter and production by 0.7%, while construction fell by 2.2%.

Further, when looking at GDP this April compared to the same month last year, it also grew by 0.6%.


‘GDP stagnates as rain stopped play’

“No growth is better than negative growth”, according to Danni Hewson, head of financial analysis at AJ Bell, who added that April’s lack of growth “should come as no surprise”.

Hewson said “rain stopped play” is the best way to describe things “as builders shunned roof tops and shoppers deserted high streets in favour of their warm, dry sofas”.

She added: “Taken alongside the latest wage figures, there doesn’t appear to be much evidence to suggest that Bank of England rate-setters will feel ready to change course quite yet. And there’s already a frisson of excitement in the air that big events like the Euros and Taylor Swift’s Eras tour will help deliver a decent boost to the economic picture by the time we get the half-year result.

“With inflation cooling and wage growth now being felt in people’s pay packets, there is a sense that the momentum seen at the start of the year is likely to return. The trick will be keeping the engine running smoothly, putting in the right kind of fuel and the right kind of investment to get us out of neutral and into a much higher gear.”


‘Economic tailwind for the next Government’

Paul Dales, chief UK economist at Capital Economics, said the stagnation “doesn’t mean the economic recovery has been extinguished, but it’s hardly great news for the Prime Minister three weeks ahead of the election”.

Dales said: “It is unlikely to suggest the economy is on the precipice again. Indeed, the 1.4% m/m fall in construction output and 2% m/m decline in retail activity suggest that a chunk of the weakness was due to April’s unusually wet weather and will therefore be reversed in May. What’s more, other indicators, such as the activity PMIs, suggest the economy is still expanding.”

He added: “Even modest 0.1% m/m rises in GDP in both May and June would generate a 0.4% q/q rise in GDP in Q2 as a whole. That would be down from Q1’s 0.6% q/q gain. But it would be [a] bit higher than our forecast of 0.3% q/q and, as it would be stronger than the Bank of England’s forecast of a 0.2% q/q rise, it further diminishes the already small chances of an interest rate cut next Thursday.

“Overall, despite the stalling of the recovery in April, the dual drags on economic growth from higher interest rates and higher inflation will continue to fade throughout the year. That will generate a bit of an economic tailwind for the next Government.”

BoE under pressure to cut base rate as ECB makes first reduction in five years

BoE under pressure to cut base rate as ECB makes first reduction in five years

Today, the ECB voted to reduce the base rate by 0.25% to 3.75%, making this the first cut since 2019.

This was after the Euro area inflation rate fell to 2.6% in May, higher than the UK’s most recent inflation rate of 2.3% and the US’ rate of 3.4% in April. The US’ inflation rate for May will be published on 12 June. 

Yesterday, the Bank of Canada was the first central bank in the G7 to reduce interest rates, with a cut to 4.75%. Earlier this year, Switzerland’s central bank made a reduction from 1.75% to 1.5%, while Sweden’s fell from 4% to 3.75%. 


BoE under pressure to cut base rate 

Russ Mould, investment director at AJ Bell, said this move brought about the “long-awaited pivot in monetary policy” and signalled “the start of a new era”. 

He added: “We’re now beginning the next phase in the cycle where inflationary pressures ease and central banks move to a new playbook to help prop up a flagging economy and make life easier for consumers and businesses who have had to stomach sky-high borrowing costs. 

“The Bank of England and Federal Reserve might give the impression they aren’t swayed by what the ECB and other countries do, but the greater the number of central banks cutting, the more pressure they will be under to do the same.” 

Lindsay James, investment strategist at Quilter Investors, said the “starting gun had been fired” by the ECB, adding that this was significant as it was the first cut by the central bank in five years and ended “what has been one of the most aggressive and swift rate-hiking cycles in modern times”. 

She added: “Importantly, this is not likely to be a single cut and done for a while, with signals suggesting a further cut or two are on the horizon this year as inflation has subsided. The ECB has stolen a march on the Bank of England and Federal Reserve – who are both potentially still a few months away from cutting – and will breathe life into an economy that desperately needs some form of stimulus. 

“This move also focuses eyes on the BoE, who will make its decision in a couple of weeks. The major central banks will not want to diverge too far from one another, and with political risk being ratcheted up, they also won’t want to be seen as too influential.” 


Getting the timing right

Ben Nichols, interim managing director of RAW Capital Partners, said: “While the impact of the cut is unlikely to be felt immediately, the move adds to the growing feeling that the global economy has turned a corner, and should provide some impetus to the Eurozone’s business investment, consumer spending and housing markets.” 

However, Nichols added: “The risk remains that the ECB is cutting rates too early, and it will be intriguing to see if the US Federal Reserve and Bank of England follow suit in the coming months.” 

He said the outlook for energy prices was still “unreliable” and geopolitical conflict could create challenges in the future. Nichols also said the Eurozone’s strong labour market could see inflationary pressures return if rates have been lowered too quickly. 

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said the ECB had moved faster than the BoE and Federal Reserve, but was “expected to hit the pause button now, as sticky inflation has returned as a worry”.

“While rates went straight up like a rocket, they look likely to descend in bumpy fashion,” Streeter said. 

She added: “Financial markets have been pricing in 2-3 rate cuts in total by the ECB by the end of the year, but it’s looking unlikely that policymakers will vote for another move lower next month.

“Caution is set to stay the name of the game, as they await fresh indications about inflation’s path.” 

Streeter said the Eurozone’s headline inflation rate “went in the wrong direction” and moved further away from the ECB’s 2% target when it rose from 2.4% in March and April to 2.6% in May. 

“However, the overall direction of travel is clear – and it’s downwards. The ECB decision will raise hopes that UK interest rates will also be brought down sooner rather than later. The data coming in over the past few days has been more positive for the Bank of England, indicating that price pressures are easing.

“So an interest rate cut in August is still a very real possibility, although the financial markets have not been fully pricing in a cut until November,” she added. 

The BoE’s Monetary Policy Committee (MPC) will make its next base rate decision on 20 June.

And the base rate wait goes on – Howes

And the base rate wait goes on – Howes

This follows 14 consecutive meetings where rates were increased from 0.1% in December 2021 to 5.25% in August 2023. 

The nine-member MPC vote in May was seven in favour of unchanged rates and two in favour of cutting rates by 25 basis points, so you could argue those who want change are making progress, given there was only one vote for a rise the month before. 

The MPC said while key indicators of inflation persistence remain elevated, they are moderating, and as a result, the financial markets expect the MPC to cut rates later this year. 

Such news seems worlds away from the bumper months of January and February of this year, when lenders priced hard for business, and advisers and consumers responded – based on the predictions rates would be cut potentially up to four times this year. 


The waiting game 

We are now left with the crumbs of comfort that there could be a rate cut in June – with traders placing a 50% chance of the first rate cut happening then rather than in August – with one more rate cut expected by the end of the year, possibly as late as December. 

Obviously, this would provide some relief for mortgage holders, who have seen mortgage rates fluctuate in recent months as expectations of base rate cuts have shifted.

The House of Commons Library research predicted 868,000 households will face a mortgage increase between now and a potential November election. The average two-year fixed-rate deal is now 5.91% and the average five-year deal is 5.48%, according to Moneyfacts. 

A number of lenders have adjusted their mortgage rates in recent weeks, whether that is because they are ahead of plan – and by pricing up, they can increase their margin – or because they do not wish to compete in this rate environment. 


The levers behind base rate changes 

But, what can we expect the trajectory for rates to be in the not-too-distant future? 

There are nine considered areas that influence the bank base rate, including the well-trodden path of inflation, monetary policy objectives, unemployment, economic conditions and market expectations, to name but a few. 

Swap rates, which take their guide from a number of macroeconomic factors, including but not limited to inflation and the base rate, have started to dip, suggesting markets are pricing in a cut in the near future.

The MPC has started to reduce the size of its quantitative easing (QE) programme from its recent peak value of £895bn to £703bn on 1 May 2024, which is significant when looking at and trying to predict future rates.

It is doing this by letting some of the government bonds it holds mature and by actively selling some of the bonds it holds to the market.

QE consists of the bank creating new money electronically (as central bank reserves) and then using it to purchase financial assets, mostly government bonds.

As I am sure you know, bond prices work in inverse proportion to swaps. When bonds are strong, swap rates tend to go down, which is what we are seeing now, when one then factors in the commercial mechanisms of banks around savings rates versus mortgage demand, margin, and risk, the hope is Q3 will see pricing in lending be more competitive and not as high as currently. 

This is great, but makes the adviser’s job harder when advising clients, particularly if clients are not sure whether to act now or wait. The good news, though, is once again the broker has never been more important in the client relationship given this uncertainty and potential for a rate drop. 

We all know rates will come down, after all, what goes up… and so on, however, the trick is watching all the areas of influence to be able to give a rounded view and act accordingly.

The results of the next scheduled MPC meeting will be announced on 20 June. The entire market will be watching this with great interest. 

Top 10 most read mortgage broker stories this week – 10/05/2024

Top 10 most read mortgage broker stories this week – 10/05/2024

Brokers reacting to Halifax announcing that a maximum broker fee would be in place from June and the base rate being held at 5.25% for the sixth consecutive month also ranked highly on the list of this week’s most read mortgage broker stories.


The British Mortgage Awards 2024 finalists announced

Maximum broker fee caps could be a ‘step too far’, brokers say


Base rate holds firm at 5.25% but long-awaited cut set for summer


Savills forecasts 20% rise in house prices by 2028



Pepper Money’s Adams shares journey of overcoming alcohol abuse in MIMHC interview


Impact of not collecting customer reviews is ‘significant’ – Rushton


Base rate hold disappointing but mortgage market in better position – reaction


Barclays improves mortgage criteria for contractors


Halifax makes interest-only change; Natwest ups existing customer rates – round-up


HSBC increases existing customer rates



Base rate hold disappointing but mortgage market in better position – reaction

Base rate hold disappointing but mortgage market in better position – reaction

Earlier today, the Bank of England’s (BoE’s) Monetary Policy Committee (MPC) maintained the base rate at 5.25%, the six consecutive time that the base rate has been frozen at this level.

Max Shepherd, group economist at Yorkshire Building Society, said that the move was expected, with BoE governor Andrew Bailey has said he is “optimistic things are moving in the right direction, implying interest rate cuts are on the way”.

He continued: “We still expect interest rates in the UK to go down this year – it’s just a question of when. The market currently expects only two cuts this year, though at the end of 2023, there was an expectation of five or six in 2024.”

Shepherd noted that US inflation was increasing again, which is one of the main reasons that fewer rate cuts are expected this year.

“The US are thought to be less likely to lower interest rates in the coming months, which makes the BoE less likely to cut too. UK data is also having an influence. While inflation is slowing, there are signs of persistence in the price of services, and the labour market is proving more resilient than anticipated,” he said.


Mortgage market in more ‘robust position’

Kevin Roberts, managing director for Legal and General Mortgage Services, said that the market expects the base rate to be cut in August, but each release changes the expected timing, and the “recent volatility looks set to continue for now”.

He continued: “There is no doubt that the market is not only busier, but also in a more robust position, than it was last year. The question on everyone’s lips is now ‘when’, and not ‘if’, we’ll see that reduction in the base rate.

“Those buying and remortgaging have enjoyed the competition on pricing that we’ve seen so far in 2024, with average rates comfortably below the figures we saw last summer. We are seeing strong demand across the board, but particularly from first-time buyers, who are being helped by wage inflation and house price stability, as well as wider inflation edging down slightly.”

Roberts said that the market “remains slightly sensitive to pricing changes”, and some buyers are “holding out” for further rate drops before taking the next step in their homebuying journey.

“Whatever your next move, we always recommend consulting a professional mortgage adviser before committing. Advisers are trained to navigate the complexities of the market, and are poised to offer tailored support throughout what’s likely to be the largest purchase of your life” he added.

Ben Allkins, head of mortgages and protection at Just Mortgages, said that it was difficult not to see today as a “missed opportunity”, especially as inflation continues to “head in the right direction”.

“I know the central bank has many factors to consider and often follows the lead of the Fed and ECB, but further delays keep the economy fighting for life and risk derailing all the positive momentum we have seen in the mortgage market so far this year.

“Just recently, we have seen the impact of the changing expectations and a higher-for-longer mentality, with swap rates rising and lenders following suit across their product ranges,” he said.

Allkins said that Just Mortgages had been “encouraged by the high demand” for valuations and appointments, showing “growing confidence” among customers.

“However, further delays make the job much harder for brokers to nurture and sustain this confidence. Thankfully, they are well-placed to help clients navigate the market and identify the opportunities still available to make their plans a reality. It’s up to brokers to keep sharing this message and offering that five-star service.

“We have to hope that the BoE finally finds the confidence to pull the trigger on a base rate cut sooner rather than later,” he said.


Base rate hold puts market on a ‘stable footing’

Paul Glynn, CEO of Air, said that today’s decision was “not the news many hoped for”, but it “keeps the market on a stable footing”.

He said: “Those on variable rates and trackers may be disappointed, but borrowers on fixed rates remain hopeful for reductions later in the year. Falling inflation also continues to ease the financial squeeze, meaning a lower base rate this year is a question of when, not if.”

Glynn said that there is “light at the end of the tunnel”, but the situation is “challenging for some borrowers”.

He said: “Thanks to a distinct imbalance between house prices and wage growth, more older borrowers will have to come to terms with managing mortgage debt in retirement. The market has undergone irreversible changes and advisers must acknowledge the reality of the situation.

“Engaging in conversations with consumers on working solutions, including later life lending, at an earlier stage must become the norm to secure good customer outcomes.”

Chris Little, chief revenue officer at Finova, said that the base rate had remained “stubborn”, but the market had “entered a new phase of stability”.

He noted that the top six lenders expect gross lending to reach a “healthy” £250bn in 2024, “buoyed by strong product transfer activity and relatively consistent swap rates”.

“However, there is a slight lingering air of uncertainty in the market. Given the current electoral cycle, it’s possible that many first-time buyers will stay put, and a mixture of cost-of-living pressures and affordability hurdles will also influence their decision-making,” Little said.

He continued: “In a highly competitive market, lenders must offer personalised rates that suit the individual financial profiles of borrowers while not endangering the lender’s liabilities. As we know, buying a house is the single-biggest purchase most people will ever make.

“As UK Finance reported, almost one in five first-time buyers were borrowing with a term of over 35 years in 2023. As such, lenders should take full advantage of technology to provide truly tailored pricing, creating a scenario where buyers can access the most affordable rates without any risk to the lender’s liabilities.

“The future is flexible pricing that can adapt to real-time market trends at speed – and the way to get it is through more dynamic pricing platforms.”

Base rate holds firm at 5.25% but long-awaited cut set for summer

Base rate holds firm at 5.25% but long-awaited cut set for summer

The Monetary Policy Committee (MPC) voted by a majority of 7-2 to maintain the base rate at 5.25%. Two members preferred to cut the base rate by 0.25 percentage points to 5%, explaining that a less restrictive bank rate “would enable a smooth and gradual transition in the policy stance, and to account for lags in transmission”.

This is now the sixth consecutive time that the base rate has been frozen at 5.25% – last at this rate in March 2008.

It was a move widely predicted by industry experts, particularly following last month’s inflation figures. The latest data set showed it had eased to 3.2% in the year to March 2024, which is the lowest level since September 2021.

However, many speculated that the bank would require further evidence to support a rate cut, and minutes of the MPC meeting read: “The committee has judged since last autumn that monetary policy needs to be restrictive for an extended period of time until the risk of inflation becoming embedded above the 2% target dissipates.

“The MPC remains prepared to adjust monetary policy as warranted by economic data to return inflation to the 2% target sustainably. It will therefore continue to monitor closely indications of persistent inflationary pressures and resilience in the economy as a whole, including a range of measures of the underlying tightness of labour market conditions, wage growth and services price inflation.”

The minutes stated: “The committee will consider forthcoming data releases and how these inform the assessment that the risks from inflation persistence are receding. On that basis, the committee will keep under review for how long bank rate should be maintained at its current level.”


Inflation and base rate path

The committee added that it expects inflation to fall to return close to the 2% target in the near term, but to increase slightly in the second half of this year, to around 2.5%. Further, CPI inflation is projected to be 1.9% in two years’ time and 1.6% in three years.

Meanwhile, the market implied path for the base rate is that it declines from 5.25% to 3.75% by the end of the forecast period, compared with an endpoint of 3.25% given in February.


‘Enough uncertainty to merit caution’

Andy Mielczarek, CEO of Chetwood Financial, said: “Holding at 5.25% was the right decision by the Bank of England, as there remains enough uncertainty and stickiness around inflation to merit caution for a while longer.

“The reality is that despite recent decreases in inflation, we have yet to hit the bank’s 2% target. We are seeing signs that the economic landscape is warming, so we must ensure that we have the stability and resilience necessary for future growth.

“A high-interest environment means difficulties for those with variable mortgage payments contributing to an already high cost of living, but these are necessary evils for the UK’s economic recovery. As long as the base rate stays high, savers need to shop around to maximise the returns they are getting from the savings market and get their financial goals back on track.”


Speculation mounts over summer rate cut

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “Policymakers are keeping a sharp eye trained on the rate of wage growth, which is still running at 6%, including bonuses. The concern is that companies may pass on those higher costs to customers. In the services sector, inflation was still at 6% in March, with prices particularly hot in bars and restaurants.

“Given the caution being expressed by some policymakers, the markets are not fully pricing in a rate cut until September, but August is also looking likely, and June still can’t be completely ruled out. Sentiment around the table at the Monetary Policy Committee will be closely watched, and if more members vote for a rate cut this time around, there will be a greater chance that one will finally land in the summer.”

House prices tick up 0.3% YOY in March – Halifax

House prices tick up 0.3% YOY in March – Halifax

Halifax’s House Price Index reveals that average house prices fell by 1% in March on a monthly basis, which compares to a rise of 0.3% in February.

The average UK house price stands at £288,430, which is £2,900 down on last month.

Northern Ireland was the strongest performing nation or region in the UK, going up by 4.3% on a yearly basis. The average house price costs £194,743, a rise of £7,972 compared to last year.

Wales’ annual house price growth came to 1.9% in March, up from 3.9% in February. The average home costs £219,214.

Scottish house prices increased by 2.1% year-on-year (YOY) to £204,835.

In England, the North West had the strongest growth at 3.7% to £232,315, whereas Eastern England reported the largest decline of minus 0.9%, with homes selling for £330,627.

London has the highest average house price in the UK at £539,917. Prices have gone up by 0.4% in the last year.


Monthly house price fall not unexpected

Kim Kinnaird, director of Halifax Mortgages, said that a monthly fall occurring after five consecutive months of growth was “not entirely unexpected”, especially “in view of the reset the market has been going through since interest rates began to rise sharply in 2022”.

“Despite this, house prices have shown surprising resilience in the face of significantly higher borrowing costs. Affordability constraints continue to be a challenge for prospective buyers, while existing homeowners on cheaper fixed term deals are yet to feel the full effect of higher interest rates.

“This means the housing market is still to fully adjust, with sellers likely to be pricing their properties accordingly,” she added.

Kinnaird said that financial markets have become “less optimistic about the degree and timing of base rate cuts, as core inflation proves stickier than generally expected.

“This has stalled the decline in mortgage rates that had helped to drive market activity around the turn of the year,” she noted.

Kinnaird continued: “The broader picture is that house prices are up year-on-year, reflecting the opposing forces of an easing cost-of-living squeeze – now that pay growth is outpacing general inflation – and relatively high interest rates. Taking a slightly longer-term view, prices haven’t changed much over the past couple of years, moving in a narrow range since the spring of 2022, and are still almost £50,000 above pre-pandemic levels.

“Looking ahead, that trend is likely to continue. Underlying demand is positive, as greater numbers of people buy homes, demonstrated by recent rises in mortgage approvals across the industry and underpinned by a strong labour market. And with rental costs rising at record rates, homeownership continues to be an attractive option for those who can make the sums work.

“However, the housing market remains sensitive to the scale and pace of interest rate changes, and with only a modest improvement in affordability on the horizon, this will likely limit the scope for significant house price increases this year.”


UK housing market going through ‘phase of cautious recovery’

Nathan Emerson, CEO at Propertymark, said that spring “tends to be one of the busiest times of the year for the housing market, and with inflation falling and interest rates remaining static, homebuyers have adjusted to the latest market conditions”.

He continued: “This should result in a surge of new buyers, sellers, and properties coming to the market as the year progresses. This was reflected in Propertymark’s latest Housing Insight Report, which found that there has been an 18% increase in the number of new properties coming to the market.

“However, if inflation continues to drop to pre-pandemic levels, Propertymark is hopeful that interest rates will also start to fall, and the whirlwind of economic turbulence will finally settle for everyone once again.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, added: “Business is brisk, as optimism over the direction of mortgage rates prevails and buyers and sellers demonstrate more willingness to transact.

“While the flurry of mortgage rate reductions at the start of the year has slowed, pricing is still considerably cheaper than it was a year ago. Assuming inflation continues to fall towards its 2% target, the first interest rate reduction could come as early as the summer, which will further boost confidence and activity.”

Karen Noye, mortgage expert at Quilter, agreed that the UK housing market is “currently navigating through a phase of cautious recovery, a period characterised by moderated growth and as shown this morning the occasional drop in prices”.

She continued: “The early surge in price increases seen at the start of the year is now showing signs that it was not as robust as once hoped, indicative of a market adjusting to significant economic pressures. However, a spring surge as a result of a revived buyer confidence may help house prices to increase at pace again.

“The dynamics of the mortgage market have played a pivotal role in shaping the current state of the property market. Initial cuts in mortgage rates sparked a renewed interest among potential buyers and movers, who had previously adopted a wait-and-see approach due to the financial uncertainties of 2023. However, the subsequent slowdown in rate reductions by lenders has served to keep property price rises in check.”

Noye said that, looking ahead, there was “anticipation” around the Bank of England Monetary Policy Committee’s (MPC’s) decisions around base rate.

She added: “With expectations leaning towards a reduction in interest rates in the not-too-distant future, there’s a sense of optimism about the market’s direction. However, this should be tempered by the fact that the market is incredibly sensitive to broader economic indicators and one hiccup can cause a significant downward reaction.

“The interplay between mortgage rates, economic policies, and buyer sentiment is shaping a landscape where stability is the desire right now, and if we can get some semblance of that, house prices are likely to start to increase again in line with demand.”

Top 10 most read mortgage broker stories this week – 22/03/2024

Top 10 most read mortgage broker stories this week – 22/03/2024

The base rate decision was widely expected, but there is cautious optimism that there may be rate cuts later this year.

Mortgage Advice Bureau’s (MAB’s) annual results were also popular, showing that gross mortgage completions came to £25.1bn. While purchase completions fell by nearly a quarter, product transfers rose by around 71 per cent.

Analysis on product transfer procuration fees and the confirmation of the £2.9bn cash offer from Nationwide to buy Virgin Money also featured.


Natwest and TSB rejig mortgage rates – round-up

MAB reports £25.1bn gross mortgage completions fueled by PTs


Royal London launches lifetime mortgages through Air Sourcing

Base rate locked again at 5.25 per cent


Unless PTs are fairly rewarded, brokers say growth of advice market is at risk – analysis


Natwest enters partnership with the British Mortgage Awards


Legal and General Retail reshuffles executive team


Base rate hold unsurprising but cuts on horizon – reaction


Nationwide confirms Virgin Money cash offer of £2.9bn


Over £2trn on table to buy lender back books ahead of Consumer Duty deadline






Base rate hold unsurprising but cuts on horizon – reaction

Base rate hold unsurprising but cuts on horizon – reaction

The Monetary Policy Committee (MPC) voted by a majority of 8-1 to keep the base rate at 5.25 per cent, making it the fifth time that the base rate has been maintained at this level.

The move was widely predicted by experts following the latest inflation figures that came out yesterday and showed that the Consumer Prices Index (CPI) slowed to 3.4 per cent, which is a fall from four per cent reported in the prior two months.

Bank of England governor Andrew Bailey hinted today that rate cuts could be coming later this year.

Rob Clifford, chief executive of mortgage and protection network, Stonebridge, said that even with the inflation drop reported yesterday, a cut in the base rate “always felt like a bridge too far” for the MPC at this month’s meeting.

However, he said that with the Office of Budget Responsibility (OBR) predicting that inflation would hit its two per cent target in the next few months, a base rate cut is “not a million miles away”.

Clifford continued: “In the meantime, the likelihood is that mortgage product rates are not going to move much in the coming weeks, and we must also recognise that, even with a cut, there won’t be a huge shift downward in pricing.

“For advisers, it is therefore all about making their customers aware of this and continuing to provide solutions based on the market as it is today, not what it was in the past or what it might be months down the line.”

Paul Broadhead, head of mortgage and housing policy at the Building Societies Association (BSA), said that the maintenance of the base rate was “widely expected” but noted that it looked like a cut in the base rate would be made in the “coming months”.

“The anticipated cuts later in the year have already seen a reduction in mortgage rates, which has led to an improvement in consumer confidence in the housing market. This month, fewer people said they are concerned about being able to pay their mortgage, with 90 per cent saying they are confident that they can maintain their mortgage payments – an increase from 85 per cent in December 2023.

“Although mortgage affordability remains the biggest barrier to buying a home, it is reassuring that this has fallen significantly over the past six months, from 71 per cent in September 2023 to 62 per cent,” he added.

Ben Thompson, deputy CEO at Mortgage Advice Bureau (MAB), said that an “unchanged rate is the next best thing”.

He said: “As inflation continues its downward trend, all eyes will be on the voting intentions of the BoE’s MPC. With just one member voting for a rate cut this time around, it might take a little longer for momentum to build toward base rate cuts.

“The good news is that mortgage rates are lower than they were this time last year. Inflation continues to slow, and we’re edging ever closer to a base rate cut, with optimism remaining that more lenders will look to lower their rates even further.

“Those looking to get on the property ladder should start getting mortgage ready by speaking with a broker. Homeowners looking to remortgage should also begin to look at what deals are available.”


Stable base rate could be opportunity for lenders to cut rates

John Phillips, CEO of Spicerhaart and Just Mortgages, said that it was a “real shame” that the MPC “didn’t seize the opportunity to make the first long-awaited cut to base rate”, especially given inflation news.

“While the central bank does have to exercise caution to reach its two per cent target, it’s critical it doesn’t stifle the economy by making a decision too late. A base rate cut today would have added some fantastic momentum to the confidence we have seen return back to the market and helped in some way to answer the affordability challenges many are still experiencing.

“Nonetheless, a fifth consecutive hold brings stability and along with yesterday’s inflation news, may reflect positively on swap rates – giving lenders the opportunity to reprice rates, even if only marginally,” he noted.

Phillips said that, without any government intervention from the recent Budget or movements in the base rate, then “brokers must continue to get the basics right, pound the pavement and offer that five-star service to continue nurturing this confidence and help answer this growing appetite to get moving plans back on track”.

John Tarazi, Echo Finance director and mortgage adviser, agreed that the market would continue to “normalise”, with a cut arriving by the end of summer.

“In the meantime, mortgage rates might be somewhat up and down, as we have seen in recent months, with lenders attempting to outprice each other. The good news is that there are now plenty of options out there for borrowers, as some lenders have introduced flexible products designed to support their customers in uncertain times. These include shorter fixed rates and deals that can be exited with minimal hassle.

“If you are applying for a mortgage or are due to remortgage, my advice is to speak to a mortgage broker to get an overview of all of your options. If there’s a favourable rate available right now, they can help you secure it and navigate today’s ever-changing market,” he said.

Base rate locked again at 5.25 per cent

Base rate locked again at 5.25 per cent

The Monetary Policy Committee (MPC) voted by a majority of 8-1 to maintain the base rate at 5.25 per cent. One member preferred to cut the base rate by 0.25 per cent to five per cent.

This is now the fifth consecutive time that the base rate has been frozen at 5.25 per cent – last at this rate in March 2008. It was a move widely predicted by industry experts, particularly following yesterday’s inflation figures, which showed it had fallen to a two-year low.

The Office for National Statistics (ONS) revealed that the Consumer Prices Index (CPI) measure of inflation had eased from four per cent to 3.4 per cent in the 12 months to February 2024, with falling food and energy costs contributing to the decline.

Experts suggested the BoE will need to take a ‘wait-and-see’ approach before making moves to cut rates too hastily, though were in agreement that rates are likely to come down slowly in the coming months.

Minutes of the MPC meeting read: “Monetary policy will need to remain restrictive for sufficiently long to return inflation to the two per cent target sustainably in the medium term, in line with the MPC’s remit. The Committee has judged since last autumn that monetary policy needs to be restrictive for an extended period of time until the risk of inflation becoming embedded above the two per cent target dissipates.”

It added: “The MPC remains prepared to adjust monetary policy as warranted by economic data to return inflation to the two per cent target sustainably. It will therefore continue to monitor closely indications of persistent inflationary pressures and resilience in the economy as a whole, including a range of measures of the underlying tightness of labour market conditions, wage growth and services price inflation. On that basis, the Committee will keep under review for how long bank rate should be maintained at its current level.”

The Office for Budget Responsibility (OBR) projections given at the Spring Budget earlier this month suggested sharper-than-expected falls to the bank rate by the end of this year to 4.2 per cent, with a further fall to 3.3 per cent in the medium term.


‘Softy-softly approach’

Edward Newman, CEO of financial comparison site Finance.co.uk, said many will be left “confused and upset” by today’s announcement, especially the millions facing a huge hike to their mortgage payments when their fixed rate deals end this year.

“With yesterday’s news that inflation had fallen to 3.4 per cent – lower than many had expected – borrowers would be forgiven for expecting to see the Bank of England make a much-needed cut to interest rates.

“The BoE appear to be taking a softly-softly approach to get inflation back to the two per cent mark, but it’s hard-working homeowners who are bearing the brunt. More and more mortgage holders will struggle to make ends meet the longer the rate remains uncut, locked into deals charging £100s more each month.”

Nigel Green, CEO and founder of independent financial advisory and asset management firm deVere Group, said: “Households stand to benefit significantly from a rate cut, as lower mortgage rates translate into reduced monthly payments, freeing up disposable income for consumption and savings.

“Additionally, lower borrowing costs make homeownership more accessible for aspiring buyers, thereby stimulating demand in the housing market.

​“By easing financial burdens on households, a rate cut would bolster consumer confidence and spending, driving economic growth from the ground up.”