Bank of England under pressure to cut interest rates before General Election
The key ECB rate has come down to 3.75 percent which compares to 5.25 percent figure in the UK.
Bank of England’s interest rate decision discussed by expert
A decision by the European Central Bank to cut its key interest rate by 0.25 percent has triggered hopes the Bank of England will follow suit within weeks.
The key ECB rate has come down to 3.75 percent which compares to 5.25 percent figure in the UK.
Mortgage industry experts insist the Bank of England's Monetary Policy Committee (MPC) has room for a series of cuts in the coming months, which would be a boost to home buyers, consumers in debt and the wider economy.
Housing is a key battleground in the general election with both the Conservatives and Labour making pledges to help young people get on the property ladder.
The main pledges surround moves to allow people with low deposits to buy a property with the government acting as a guarantor, while Labour is promising to sweep away planning controls to boost house building.
The Bank of England has refused to cut the base rate in recent months arguing that the current high level is needed to bear down on inflation.
However, inflation is already down to a 'normal' figure of 2.3 percent and there are hopes it will fall further over the summer before, potentially, ticking upwards in the autumn.
Andrew Montlake, Managing Director at Coreco, told Newspage: "The ECB has potentially fired the starting pistol on UK rate reductions in the months ahead.
"Markets will now be salivating at the prospect that the UK will soon follow suit, but the Bank of England has proved to be more cautious and a change before the summer is still unlikely.
"Threadneedle Street may also be loath to move before the General Election is out of the way for fear of being accused of not being independent, and they will want to see more concrete data that inflation in the UK is looking more likely to stay low rather than bounce again in the final quarter of the year.
"I hope the Bank will be brave and follow suit sooner rather than later as the country is crying out for an easing in policy."
Katy Eatenton, Mortgage & Protection Specialist at Lifetime Wealth Management, said: "A drop in the base rate will kick the summer off nicely and is just what the UK's beleaguered borrowers need. I’m still not convinced the Bank of England will follow suit at the next meeting, but a cut is definitely coming. We may just have to wait a little longer."
Riz Malik, Director at R3 Mortgages, said: "The ECB may just have given the Bank of England confidence to act at its next meeting a fortnight today and deliver us our first base rate cut since 2020.
"This would be a huge boost to the property market, buyers and also those borrowers refinancing. It could also provide a much-needed boost to the Conservatives if that first cut comes just ahead of polling day."
There are concerns in the industry that the Bank of England will hold off any cut in rates because it does not want to be seen to be taking sides in the election.
Justin Moy, Managing Director at EHF Mortgages said: "This first cut in five years from the ECB gives the Bank of England the license to cut the base rate at its June meeting.
"Elections need to be mutually exclusive to these decisions, ensuring that borrowers start to benefit immediately from the austerity measures of the past few years."
Harps Garcha, Director at Brooklyns Financial, said: "Finally, a central bank has taken the leap to start reducing rates."
Dariusz Karpowicz, Director at Albion Financial Advice said: "I'm not convinced that the Bank of England will follow the ECB's decision to cut rates. There are far too many unknowns, and the upcoming General Election and mixed signals from the UK economy add to the uncertainty.
"While the ECB’s move to ease monetary policy is a positive sign for taming inflation, the Bank of England might take a more cautious approach given the current economic climate and political landscape.
"If the Bank of England does decide to cut rates, it could potentially benefit UK borrowers by making mortgages more affordable, sparking some much-needed activity in the property market."
Lewis Shaw, Owner and Mortgage Expert at Shaw Financial Services, warned: "There's no chance the Bank of England will cut in June as it would be seen as too political given the impending General Election."
