"In reality a reduction of just 0.25 percentage points has not made a significant impact on the overall cost of mortgage payments, as financial markets had expected it and already priced it in. "
- Paul Broadhead, head of mortgage and housing policy at the BSA
Following the cut in the Bank Rate last month, the first since March 2020, almost half of UK adults (44%) think that based on the current economic conditions, the Bank of England’s Monetary Policy Committee should cut the Rate again at lunchtime today, a new survey from the Building Societies Association reveals.
Around a quarter (23%) want to see a 0.50 percentage point cut or more, with a similar number (21%) believing a cut of 0.25 percentage points is needed.
Unsurprisingly, mortgage borrowers are more likely to want the Bank Rate to fall today, with 59% saying it should be cut.
One in five (21%) UK adults think the MPC should leave the rate at 5.00%. Only 6% think there should be an increase in the rate, which falls to just 2% for those who have a mortgage on their home.
Mortgage affordability
Whilst the majority of mortgage borrowers are expecting a Bank Rate cut today, the vast majority are not worried about their mortgage costs. Just 8% are concerned about maintaining their mortgage payments for the next six months, down from 10% three months ago. Only 2% said they are not at all confident they can keep up their repayments.
That confidence is not the same for would-be homeowners. The report shows that the affordability of monthly mortgage repayments continues to be the biggest barrier to buying a home, with almost two-thirds (61%) citing this. Over half (55%) said raising a deposit is an obstacle to them getting a step on the property ladder.
Housing market sentiment
Despite the Bank Rate cut last month, overall sentiment in the housing market remained low. Less than one in five people (17%) think now is a good time to buy a home, with over a third (35%) thinking it is not a good time to buy – giving a net score of minus 17. Whilst this is an improvement on the market sentiment in June, when the net score was minus 24, it demonstrates a continued lack of confidence in the market.
Paul Broadhead, head of mortgage and housing policy at the BSA, said: “The cut in the Bank Rate last month marked a significant turning point in what had been a very difficult two and a half years.
“Whilst the news was welcomed by many homeowners and would-be homeowners at the time of the cut, in reality a reduction of just 0.25 percentage points has not made a significant impact on the overall cost of mortgage payments, as financial markets had expected it and already priced it in. It is not therefore surprising that the majority of mortgage borrowers are looking for a further cut this month.
“It is clear that it will take more than a small 0.25 percentage point shave off the Bank Rate to bring confidence back to the housing market. First-time buyers, which are critical for a properly functioning housing market, are still indicating that they are unable to afford to take that step into homeownership. Whilst they will be hopeful of a rate cut it’s quite possible that their hopes will be dashed at noon. Markets and forecasters are expecting the Bank Rate to remain unchanged whilst the MPC wait for additional evidence that inflation will remain persistently lower in the future."
