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The higher base rate has become inflationary itself – Star Letter 21/06/2024

  • 21/06/2024
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The higher base rate has become inflationary itself – Star Letter 21/06/2024
Each week, Mortgage Solutions and its sister title, Specialist Lending Solutions, pick the top comments from our readers.

This week’s first comment came from Mike Harper in response to the story: Base rate hold may ensure market stability and lead to lower mortgage pricing – reaction 

He said: “The Bank of England has finally lost control of the economy, any hope that they had moved on from 1980s Anderson economics and put down their 40-year copy of Sloman is finally gone.

“Their irrational and non-evidential insistence that the high base [rate] has controlled inflation and brought it down is quite frankly insane. The high base rate has actually become inflationary in itself?” 

Harper continued: “I think we should replace the entire committee with people that can think in the real world and stop using base rates as the blunt instrument to cure all inflationary ailments. 

“The economy is skidding on black ice, the government is leaning out of one window and the Bank of England is claiming to be able to control it by waving out of the other window and the rest of us are left to pick up the pieces.” 


Consumer Duty doing its job

Graeme Gillespie responded to the story: Broker Your Mortgage Decisions closed under fee pressures owing £1.2m

He said: “First and foremost, it’s great to see Consumer Duty making a difference; creating an impetus for responsible lenders to look at the fees and conditions being applied down their supply chain. 

“Understandably a lot of pain from those who are owed money – both brokers and consumers who have paid for a lifetime service they will now not collect on. 

“It’s always tricky to judge if a firm has continued selling beyond the point they should; many successful firms have been close to running out of cash, only to pull it back at the last minute and then go on to great success. 

“The concept of constantly reviewing a mortgage to ensure you have the best solution is a good idea – it could save consumers a small fortune – but in these days of tech and data drive automation, it’s hard to justify a fee that equates 20x the average broker fee. I’d imagine an app could achieve the same thing for £10-20 a year.” 


Small landlord exits 

The next comment came from Arron, reacting to the story: Industry welcomes Labour manifesto but will it deliver on promises? – reaction 

Arron said: “A landlord contacted me today to say he is selling his one buy-to-let [property] because of Labour’s manifesto. 

“He is just about making a profit of a few hundred pounds per year, but there is no spare money to bring the Victorian house up to EPC in the next years – cost circa £12,000. And, with the ban on no-fault evictions, if he does not serve notice on his tenant now, he fears he will not be able to sell the property.” 

He added: “On top, they have pledged no rises in income tax or National Insurance, but they have suggested in the past aligning capital gains tax with income tax, so he would incur a 40% charge. However, there is insufficient equity in the property to cover this tax bill. 

“His other choice would be a substantial rise in rents, but he feels Labour might introduce rent caps if rents start rising. 

“In short, the only option for him and many small landlords is to exit now.” 

Arron also responded to the story: More than a third of private renters struggle to afford rent – TDS 

He said: “Many rental charities have been calling for more regulation of landlords while also accepting the supply needed to increase without realising [the] former is making the latter worse. 

“A few weeks ago, it was reported 52% of evictions are now due to landlords selling, driven by high rates, punitive taxation and more regulation.” 

Arron continued: “Labour is proposing bringing back the EPC requirement, which will see many landlords incur tens of thousands in bills (if they can find a trades[person] to do the work) for no extra rent, especially if the charities persuade Labour to resurrect their proposal of rent caps. 

“They are sowing the seeds for the end of the ruination of the rental market where it will not be easy to [win] landlords back.” 


These comments are from our readers and do not necessarily reflect the views of Mortgage Solutions or Specialist Lending Solutions.

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