Bank of England governor Andrew Bailey appeared in front of the Treasury Select Committee yesterday and was asked if the central bank being slow to raise the base rate meant there was no time to pause and see the effect on the economy. 

He said “we are much nearer now to the top of the cycle” but insisted he was not saying the base rate was “at the top of the cycle” because the Monetary Policy Committee (MPC) still had a meeting to come. 

“We are much nearer to it on interest rates, on the basis of current evidence.” 

He added that his response was “not a comment on what we’re doing at the next meeting”. 

Falling mortgage rates 

Mortgage advisers said the governor’s comments would result in reductions to mortgage rates, which have already been falling due to a drop in swap pricing. 

Riz Malik, founder and director at R3 Mortgages, said the comments “were a surprise” and predicted that any subsequent rate reductions would be “small and often”. 

He added: “I am expecting more high street lenders to reprice within the next week, with criteria expansion as well. Given there are a large number of maturities within the next six months, this will be positive news for borrowers. The chances of the Monetary Policy Committee going back on the Christmas card list are increasing.” 

Peter Stamford, director and lead adviser at Moor Mortgages, also said the remarks made by Bailey were unexpected. 

“They signal a potential good spell for borrowers on the horizon. As we near the next base rate decision, I’m bracing for a series of modest yet frequent rate cuts from high street lenders, who seem keen to expand their criteria and snatch a larger market share amid the dwindling demand for property,” he added. 

The end is in sight 

Graham Cox, founder at Self Employed Mortgage Hub, said both Bailey and Chancellor Jeremy Hunt were making “positive noises about inflation” so he saw the potential for no increase to the base rate later this month. 

“If there is, it could well be the last,” He added. 

Cox said: “Whilst we wait with bated breath, I suspect UK mortgage rates will continue to drop, as demand has decreased sharply over the past couple of months and lenders will be getting twitchy about transaction volumes.” 

Charles Breen, founder and director at Montgomery Financial, added: “I think that rates will increase again at the next Monetary Policy Committee meeting and then we will have a period of stability for circa six months. Hopefully, the latter half of 2024 we will see rates decreasing. It is all dependent on inflation and if that keeps trending down.”