Brokers say lower base rate will boost buyer confidence in the property market
Barclays has forecast that the Bank of England will cut the base rate from 4% to 3.75% at its monetary policy meeting next week, despite financial markets currently assigning only a 27% probability to such a move.
The bank’s economists expect a close vote, noting that arguments exist for both maintaining and reducing the current rate. “There is an increased ‘risk reward’ for traders to bet on a rate cut,” said Moyeen Islam, analyst at Barclays. “The bet against market pricing is compelling.”
Other major institutions have weighed in, with Goldman Sachs reaffirming its expectation of a rate cut and Deutsche Bank describing the decision as a “very close call” for committee members.
Barclays, along with several other major lenders, recently implemented mortgage rate cuts, a move that many see as a response to increasing market confidence that the Bank of England will lower the base rate again before the end of the year. “Lenders are pricing in this expectation early, competing aggressively to attract borrowers,” said broker Euan Stewart of Perth Mortgage Centre.
Meanwhile, a recent survey by HSBC UK, the Broker Barometer, reveals that most mortgage brokers want the Bank of England to lower the base rate at its upcoming meeting.
According to the survey, 41% of brokers believe a reduction to 3.75% would best support the property market, while 18% favour keeping the rate at 4%.
Some brokers advocate for a more significant cut, with 25% preferring a drop to 3.50% and 16% supporting a reduction to 3.25%. Fewer than 1% see merit in a rate increase.
Brokers suggest that a modest decrease could boost buyer confidence and affordability, potentially aiding the recovery of housing transactions after a period of subdued activity.
“Brokers are the beating heart of the mortgage market and are clearly signalling that a modest base rate cut would help put the housing market on firmer footing,” said Chris Pearson, head of intermediary mortgages at HSBC UK.
The Bank of England will announce its next base rate decision on Thursday.
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