The Bank Base Rate Question

This month’s decision by the Bank of England’s Monetary Policy Committee (MPC) to hold Bank Base Rate (BBR) was hardly unexpected.


Given what is going on politically, and the Brexit impasse, it would require some serious economic changes and drivers to force the MPC’s hand at the moment. At a time when uncertainty is self-evident, why wouldn’t the Bank keep the status quo?


How Has A Static Bank Base Rate Affected The Mortgage Market?

Indeed, keeping BBR at 0.75% looks like the go-to decision for the rest of the 2019; indeed the markets are only anticipating one rise in BBR between now and the end of 2020.


That hasn’t however stopped the Governor, Mark Carney, coming close to resurrecting his ‘unreliable boyfriend’ moniker though with comments that rate rises could be “more frequent” if both rises in growth and inflation play out as some forecasts suggest.


Such comments are likely to be picked up by both existing and potential mortgage borrowers and perhaps cause concern, which leaves advisers with an opportunity to dispel some of the myths around mortgage rates to customers and, at the same time, maybe pick up some extra business.


The disparity between BBR and mortgage pricing of course continues to exist and there is clearly a number of positive messages that can be promoted, such as vibrant market competition and the helpful impact it is having on rates. Let’s spread the word that we have some ultra-low rates currently available – five-year fixes below 2% for instance – and these are worth shouting about.


Another area which I hope advisers work on in their external messaging is around the FCA’s Final Report and subsequent Consultation Paper, which says advisers are not finding their clients the cheapest rates and that a growing number of borrowers might be better off sourcing products themselves.


This is clearly not a great endorsement for advice but we should be doing all we can to debunk this argument especially with a market which is fast-changing and much more complicated than it has ever been, often creating consumer confusion.


Is Mortgage Advice Still Necessary For Clients?

The suggestion that it is somehow simple for borrowers with increasingly complex incomes/needs/requirements to ‘do it themselves’ is absolute hokum, and it is disappointing to see a regulator seemingly pushing execution-only at the expense of qualified and regulated advice.


The need for advice has never been greater and the protections it affords – while apparently not the regulator’s primary concern – are as important as they have ever been. Let’s not be frightened to highlight the positives of the mortgage market and the crucial role advice plays – to do otherwise not only risks our customer base but also greatly enhances the risk that many more borrowers will find themselves with unsuitable mortgages.


Rob Clifford is a director of Stonebridge Group