Mortgage brokers have identified next Wednesday – June 19 – as vital for the financial health of millions of Britons and businesses.
That is the day that the latest inflation figure is announced and it will be crucial in terms of whether the Bank of England will decide to cut interest rates the following day.
The CPI measure of inflation has come down from a peak of 11.2 percent in October 2022 and is currently at 2.3 percent, with predictions of a further fall next week.
As a result, it could well dip below the 2 percent target set by the Bank of England as the benchmark needed before it can cut the base rate from the current level of 5.25 percent.
Any cut would be a lifeline to home buyers, particularly the more than 1 million who are coming off fixed rates and hunting around for a deal which limits any increase in monthly payments.
Mortgage brokers insist an early rate cut is vital, however some fear the Bank will be reluctant to make a change that might be seen as favouring the government in the run-up to a General Election.
Andrew Montlake, Managing Director at Coreco, said: “Next Wednesday has the potential to be a Big Wednesday for borrowers.
“If inflation edges down further, and even hits target, then the Bank of England will be under real pressure to reduce the base rate.”
Rohit Kohli, Director at The Mortgage Stop, told Newspage: “Inflation falling below 2 percent would probably make it hard for the Bank of England not to act.
“However, another mixed bag of economic data may be the justification that the MPC need to continue their wait-and-see approach, which will shatter the hopes of millions of borrowers for some much-needed respite before the start of the summer holidays.”
Ben Perks, Managing Director at Orchard Financial Advisers, said: “Britain is enduring some pretty stormy economic conditions but clear skies could be on the horizon if CPI data breaches the symbolic 2 percent target next week.
“Given the stagnant economy and the desperation of borrowers around the UK, the Bank of England should do the right thing and act.”
Ken James, Director at Contractor Mortgage Services, asked: “Will the dam walls break and release the relentless pressure many households are under?
“If inflation stays at its current level or see a small increase, we may as well wave goodbye to any possible base rate reduction this month. “This will only create more negative vibes for the mortgage market and the stagnant economy, which desperately needs an injection of good news. But if inflation hits target, then there’s still a chance, even if the markets are saying the odds are fairly long.”
In theory, the Bank of England’s Monetary Policy Committee should base its decisions on the nation’s finances, however many brokers believe they will be swayed by politics and a desire not to be seen to be interfering with the outcome of the election.
Samuel Mather-Holgate, Independent Financial Advisor at Mather and Murray Financial, said: “The Bank of England will be happy if inflation is slghtly stickier this month, as they won’t want to be seen to be doing anything political this close to an election. Expect a few more months of higher mortgage repayments.”
Dariusz Karpowicz, Director at Albion Financial Advice, advised people not to get their hopes up.
“The Bank of England is likely to hold steady on the base interest rate, as there are far too many unknowns and we need more stability,” he said.
“Next Wednesday could indeed be a Big Wednesday for borrowers, but it might not deliver the perfect wave. Instead, it could be more of a steady ride.
“The CPI data will provide essential insights into inflation trends, influencing the following day’s interest rate decision. With the General Election and ongoing economic uncertainties, the Bank of England will probably play it safe.”
Mike Staton, Director at Staton Mortgages, said a base interest rate cut is “desperately needed”.
He said: “With Rishi Sunak throwing the hand grenade of a UK election into the mix, we now face a period of uncertainty regarding who will be running the country in a few months. This uncertainty will likely result in the BoE opting to keep the rate unchanged.”
