Don’t expect any mortgage rate cuts any time soon as retail prices, houses jump
Catherine Mann, one of the Bank of England’s most outspoken policymakers, has warned against moving too quickly on interest rate reductions, insisting that borrowing costs should remain on hold for longer before any meaningful cut is made.
The Monetary Policy Committee (MPC) member cautioned that the Bank risks sending the wrong message to households and businesses if it eases prematurely, particularly at a time when expectations of higher prices are proving difficult to dislodge.
“I prefer a longer hold… and make a bigger cut when you do to make it very clear that this is not in response to the financial markets or other things,” Mann said. “This is really about the UK economy.”
Inflation expectations on the rise
Her intervention comes as consumer price expectations have shifted upwards in recent months, fuelled by continued rises in food costs. Fresh figures from the British Retail Consortium show shop prices climbing at their fastest pace in 18 months, with beef and dairy inflation keeping household budgets under strain
Long-term inflation expectations have risen to 3.8 per cent this year, their highest since 2019. Mann argued that such sentiment can trigger second-round effects, with workers demanding higher wages and firms passing on further increases.
Other members of the MPC have taken a more relaxed view, pointing out that energy and food shocks could fade over time. Sarah Breeden, deputy governor for financial stability, suggested there was little “evidence that the disinflation process is veering off-track.”
Economic outlook divides the Committee
Mann, however, stressed that only a sharp deterioration in jobs and pay would persuade her to back near-term easing. “It really is a matter of a non-linear adjustment in the labour market,” she said, pointing to the possibility of sudden shifts in employer demand.
The split highlights the growing divergence inside the Bank. While governor Andrew Bailey has accepted that borrowing costs are likely to fall, he has refrained from giving any timetable, while colleagues including Dave Ramsden have signalled confidence that more cuts are possible.
Mortgage market in the balance
For mortgage professionals, the MPC’s debate comes at a pivotal moment. Nationwide data this week revealed UK house prices rising faster than expected in September, supported by resilient wages and a historically low jobless rate of 4.7 per cent
The average home now costs £271,995, with Northern Ireland recording nearly 10 per cent annual growth.
With approvals stabilising at pre-pandemic levels and quoted mortgage rates edging lower, a drawn-out hold on Bank Rate will prolong the tension between affordability pressures and steadying demand.
Robert Gardner, Nationwide’s chief economist, said that “despite ongoing uncertainties in the global economy, underlying conditions for potential homebuyers in the UK remain supportive.”
Political and fiscal cross-currents
Mann also alluded to the wider political backdrop, noting that volatility in the United States could spill into UK markets over the coming months. Domestically, Chancellor Rachel Reeves has already warned of substantial tax rises in her November Budget, a move retailers argue will keep consumer prices higher for longer
For brokers, lenders and borrowers, the debate underscores how finely balanced the outlook has become. Inflation remains more persistent in Britain than in the eurozone or the US, yet the housing market has shown surprising resilience. The Bank’s choice between holding rates or cutting them will therefore have a direct bearing not only on monetary policy credibility but also on mortgage affordability well into next year.
