Mortgage industry reacts as MPC votes 6-3 to stay at 3.75%
As the Monetary Policy Committee of the Bank of England voted to keep the base rate at 3.75%, insurance giant, Metlife UK, called on borrowers to seek advice from brokers before cancelling protection cover which was ‘more valuable than ever.’
Adrian Matthews, UK Deputy CEO at MetLife UK said: “The MPC’s decision to hold rates may appear to be good news for borrowers, but markets expect significant hikes later in the year which will be an even greater squeeze on homeowners.
“Mortgage payments accounting for such a high proportion of household expenditures can cause many families to review their financial commitments and call into question the value of products like protection insurance, we get it.
“Yet our research shows that nearly 28% of mortgage holders have missed a payment because an unexpected health shock stopped them from working, while one in five have no savings safety net in place.
“Against a backdrop of persistent higher rates, protection insurance has never been more valuable, and we would urge customers to speak to their adviser about premium concerns before making decisions about cancelling or reducing levels of cover.”
John Phillips, CEO of Just Mortgages and Spicerhaart added:“The decision to leave the base rate unchanged was largely priced in, as better-than-expected inflation data helped negate the need for the central bank to pull the trigger on any rate increase. For once, I think we’re all grateful for the bank’s patient, cautious approach as it monitors the impact of the Middle East conflict – which by all accounts, the UK has managed to weather pretty well so far. Even as oil prices have risen once again following the collapse of peace talks.
“How long they will be able to hold off any increase still remains uncertain, with some predictions of one or more by the end of the year. The message to clients to act sooner rather than later, I think is a shrewd one, while also being aware of the reality that lenders do need to lend as they have one eye on their end of year lending targets.
“Ultimately, successful mortgage decisions have never been about perfectly timing the market. They’re about balancing affordability, future plans and product suitability against the information available today. That remains the strongest advice brokers can offer, regardless of what happens to the base rate or in the wider economy.”
And Hina Bhudia, Partner, Knight Frank Finance, said: “The MPC has turned a little more hawkish since the previous meeting, with three members voting to raise the base rate, which is unsurprising given the escalation of hostilities in the Middle East. Mortgage lenders have already repriced higher to account for this, so borrowers should enjoy some stability in the short term.
“That said, the outlook for mortgage rates over the coming months remains highly uncertain. Much will depend on developments in the Middle East and whether higher energy prices feed through into broader inflation at a time when demand across the economy remains relatively subdued. Many lenders are behind their targets for the year and will pass on to borrowers any reduction in funding costs as soon as they can.”
