Bank of England must pull its finger out on rates - experts

The latest inflation figures mean there’s no excuse for the Bank of England to keep interest rates at their current high, according to experts.

The headline inflation figure came in at 2% for June, slightly higher than expected. It had fallen to the target 2% the previous month after two-year of much higher inflation. It hasn't been below 2% since April 2021. 

Behind the headline rate, services inflation has remained at 5.7% and core inflation - which strips out volatile elements such as food and energy - also remained static at 3.5%. Falls had been forecast.

The Bank of England’s monetary policy committee, which sets base rate on which interest rates are usually based, meets on August 1. 

Mortgage experts quizzed by the Newspage agency believe the time is now ripe for the BoE to drop rates at last.

Rohit Kohli, director at The Mortgage Stop, says: "The latest inflation data from the ONS, with CPIH and CPI holding steady at 2.8% and 2.0% respectively, signals a clear need for the Bank of England to act decisively and cut interest rates in August. The Bank of England must ditch its cautious and dithering approach. It has to take the lead in stimulating economic activity and get ahead of the curve. A rate cut would make borrowing more affordable, potentially revitalising the property market by encouraging homebuyers and remortgagers. There is potential for two rate cuts this year, but given the Bank of England's overly cautious approach, this seems unlikely. It's time for the Bank of England to provide the necessary economic stimulus and support the broader economy."

Jack Tutton, director at SJ Mortgages, has this take: "Inflation remaining at 2% will put more pressure on the Bank of England to cut the base rate in August. They have been wanting to see consistency with inflation to ensure it’s under control and back to target. Inflation has hit the target for two consecutive months now so it is time to relieve pressure on mortgage holders. We have seen mortgage rates coming down in the past few weeks but they are still higher than they were at the start of the year. The Bank of England could breath much needed positivity into the markets by cutting the base rate on 1st August."

Emma Jones, managing director at Whenthebanksaysno online service, comments: "Inflation staying at 2% could, in theory, see the Bank of England cut rates in August. Borrowers need it and the economy needs it. Sadly we know how cautious the Monetary Policy Committee can be and, once again, they may well err on the side of caution. If that first rate cut does come, mortgage rates should continue to improve and the property market could see a strong second half to the year."

But Craig Fish, director at Lodestone Mortgages and Protection, concedes that the Bank could go either way. He says: “An optimist would hope that because the numbers have remained the same that now is the time to make that cut, but the pessimist would say that because the numbers didn't drop, we should wait until September. Sadly there are more of the latter on the MPC so it feels like a cut is off the cards for now, much to the dismay of households and businesses up and down the UK. If the committee continue along the 'too little too late' path, there needs to be change, as they are clearly out of touch with what the UK needs."

Finally Ben Perks, managing director at Orchard Financial Advisers, adds: “It is a huge relief to see inflation remain at 2%, especially given the Bank of England's poor track record of hitting it. It leaves the Monetary Policy Comittee with very little choice but to cut the base rate in August. If they opt to hold it, any rationale will fall firmly on deaf ears and people will be calling for resignations. They cannot delay any further. This stability at 2% warrants reward and borrowers need some respite, and Threadneedle Street should cut the base rate as soon as possible."

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