"In cutting the Bank Base rate to a new historical low, the Governor has at least delivered on his pledge to help try to boost an ailing, post-Brexit economy."
The move has been widely anticipated, with many noting that, while it may spell good news for homeowners, it is yet another blow for savers.
Jeremy Duncombe, Director at Legal & General, noted that while the move was ‘significant’, is unlikely to have any real impact on the already-low fixed rates for mortgages.
He added: “Despite the base rate remaining at 0.5% for seven years, fixed rates have been falling consistently since 2009. Many lenders will have thus already priced into their products and deals such a reduction in rates, with few looking to drastically amend their offers off the back of today’s news.”
Others pointed out, however, that tracker rates could be affected and stressed that lenders should react to the rate cut. Mark Harris, chief executive of mortgage broker SPF Private Clients, said, “It is important that lenders immediately pass on the full benefit of the cut to those on tracker-rate mortgages and those on products linked to their lender’s standard variable rate.”
He also suggested that, despite current low rates, some lenders may introduce even lower fixed rate mortgages, noting that lending appetite is strong and that lenders may use the rate cut to stay competitive.
Savers seem the obvious victim of the rate cut, having suffered low rates for a protracted period already - but, as Steven Cameron, Pensions Director at Aegon, notes, the move means “now is probably the worst time ever to be making a retirement decision, with those buying an annuity today locking in to super-low returns for life”.
He acknowledges that no short term improvement to annuity terms and interest rates are guaranteed, having seen seven years of low rates so far. But he added that:
“Those not ready to make a ‘once in a lifetime’ decision could consider deferring their retirement date or alternatively keeping their pension fund invested and drawing a retirement income direct from their fund.”
John Goodall, CEO and co-founder of Landbay, also suggested that the foreseeable future is likely to see low rates, adding that, for savers, “the outlook… is bleak as CPI is expected to rise further and rates are likely to remain low for a long time”.
While the negatives are clear, then, for certain demographics, on an economic scale the industry appears to be positive about the signal being sent by the Bank of England.
NACFB chief executive Adam Tyler noted that the decision was a ‘pre-emptive strike’, adding that “the Bank of England clearly wants to get ahead of the economic curve rather than risk falling behind it.”.
Others saw it as a reassuring move for markets, with chief economist of the BBA, Dr Rebecca Harding, saying it “sends a clear signal that the Bank of England is taking a ‘whatever it takes’ approach to stabilising the economy”.
Andrew Montlake, Director at Coreco Mortgage Brokers, was wary of whether the MPC had played its hand too soon.
"In cutting the Bank Base rate to a new historical low, the Governor has at least delivered on his pledge to help try to boost an ailing, post-Brexit economy. However, there is a risk that he has acted too early, potentially diluting a more powerful weapon to use in the future should the need arise.”
