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  • Writer's pictureMortgage Tree

Is the Bank of England behind the curve?

Article taken from The Intermediary Online

A number of grim official stats were published last week showing an increase in mortgage arrears and both individual and company insolvencies.

Households are under immense pressure so, ahead of this week’s CPI data, Newspage asked brokers and financial services experts when the Bank of England should cut interest rates – and does it risk once again being behind the curve if it fails to act soon? 

Graham Cox, director at SEMH Self-Employed Mortgages:“The Bank of England’s forecasting has been dismal over the last few years. First inflation would be transitory, then they grimly warned of the worst recession in 100 years. Only last November, inflation was not expected to reach the 2% target for another year, now they predict it will do so next month. The bottom line is, when both mortgage rates and house prices are so high, it’s a recipe for economic disaster. We need a base rate cut now.”

Craig Fish, director at Lodestone Mortgages & Protection:“The Bank of England are damned if they do and damned if they don’t. Given the immense pressure households and businesses are under, I fear they may already be too late. They need to stop looking over their shoulders at what the Fed is doing because it’s what’s happening on this side of the pond that matters. People and businesses are struggling and this is only going to get worse, yet the worry is that the Monetary Policy Committee is blinded by the data and simply doesn’t know what to do. The best thing they can do is start cutting rates and bringing in fresh faces who are capable of making better decisions. The current MPC have a history of doing too little too late.”

Ranald Mitchell, director at Charwin Private Clients:

“Great” Britain? More like bruised, battered and broken Britain. The grim insolvency and arrears data published last week are the latest stats to show that the Monetary Policy Committee have pushed households and the wider economy too far in their relentless inflation quest. We need their support and they must now act, showing the nation that they are marginally in touch with reality.”

Samuel Mather-Holgate, independent financial advisor at Mather and Murray Financial:“The Bank of England is so behind the curve they can’t even see it. Two of the Monetary Policy Committee voted to increase rates at their last meeting. This is at a time when inflation is falling like a barrel over a waterfall and the economy is on the same trajectory. Clearly, inflation is being prioritised at the expense of the economy and the well-being of the general population. Threadneedle Street was far too late to start increasing rates, meaning they had to hike them aggressively, which shocked mortgage holders. Now, they are too late to cut them at a time when help for the economy is essential. It’s time for a new mandate on Threadneedle Street.”

Charles Breen, founder at Montgomery Financial:“The Bank of England’s belated tackling of inflation was a basic breach of duty. People are suffering, yet the Bank is either blind or ignorant of the average borrower’s plight. Holding the base rate at its current punitive level is hurting people’s lives, which is why we are seeing mortgage defaults skyrocket. Based on their current attitudes to people’s finances, if the Bank of England were on the Titanic they would only leave their friends in first class on the lifeboats and leave the rest of us to fend for ourselves.”

Ben Perks, managing director at Orchard Financial Advisers:“As borrowers battle with monthly budgets it is now time for the Bank of England to help the public and take action. The rise in arrears is not surprising and they will continue to climb if the Monetary Policy Committee delay a reduction in Base Rate. Even a small drop will have a huge impact. They were slow to act when inflation started to rise, they need to get ahead of the curve this time. Surely, they cannot be caught napping again.”

Rohit Kohli, director at The Mortgage Stop:“Rather than stuck behind the curve, several Monetary Policy Committee members seem separated from reality. The fact that two members wanted a further increase should sound alarm bells for borrowers. Thankfully there is at least one member with some common sense and here’s hoping they are able to influence their fellow committee members. However, don’t expect rates to be slashed anytime soon. Markets and lenders, given what we have seen from Threadneedle Street so far, are not expecting a cut this time round but maybe late summer instead.”

Wes Wilkes, CEO at Net-Worth NTWRK:“It’s been stated ad nauseam that the Bank of England were horribly behind the curve on inflation. Expecting a pivot from caution now based on a modest turn in mortgage arrears and insolvencies is folly, however hard that is to hear. The Bank will be looking at other stats that were published last week such as labour market and wage growth. Both of these measures still support caution on rate cuts given that persistently high pay growth could prevent inflation from sustainably returning to the BoE’s 2% target. Wages are still growing at roughly double the pace that would be consistent with meeting the inflation target in the medium term. This will likely be enough for the majority of the MPC to remain steadfast on rates. Higher for longer is what we are faced with.”

Michelle Lawson, director at Lawson Financial:“The Bank’s decision this week will certainly be interesting. The forecast is a hold while they continue to focus on inflation. But this focus is taking its toll: once thriving businesses are closing, defaults are rising and bankruptcies are increasing. As Henry Van Dyke said, ‘Time is too slow for those who wait, too swift for those who fear, too long for those who grieve, too short for those who rejoice, but for those who love, time is eternity.’ This is certainly playing out in the UK economy.”

Amit Patel, Adviser at Trinity Finance:“The MPC need to begin the process of reducing the base rate now not in two to three months because by then it will be too late. The majority of the members of the MPC all come from privileged backgrounds so they have no idea of what life is like on the breadline. Lower interest rates will alleviate the pressure on millions of households and will enable small to medium-sized businesses to invest in their businesses to grow.”


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