Financial services and property experts urge Bank of England to leave rates on hold

Financial services and property experts have almost unanimously urged the Bank of England to leave rates on hold at tomorrow's Monetary Policy Committee meeting, and most are expecting it to do exactly that.

According to Richard Campo, founder at Rose Capital Partners: "I'll be shocked if the Bank of England does anything over than hold rates on Thursday. With signs of core inflation easing, increasing arrears, defaults, repossessions and business failures, it would just heap more pain on people to raise rates, and the picture is far too uncertain to lower them. Money markets seem to agree with falls in both 2- and 5-year SONIA swaps. The inflation data for October will be key, so until we see that, it would be very brave for the Bank of England to do anything other than hold."

David Robinson, director and financial planner at Wildcat Law, agreed: "Sometimes the best action is inaction, and in this case, a positive decision to do nothing is very much in order. While heavily criticised in the past months, the Bank of England has successfully halted Sterling's death slide and, with it, cut the amount of "imported" inflation. The issues with the British economy will not be fixed by any decision Threadneedle Street can make but, by doing nothing, the Bank of England will at least ensure it isn't making matters worse."

Rob Gill, managing director at London-based broker, Altura Mortgage Finance, shared much the same view: “While inflation is still significantly above target, the trend is very much downward, and there are increasing indications the economy itself is slowing down as a direct consequence of Bank of England rate hikes. The Bank should therefore hold this time round, and even go as far as indicating we are now at the peak so their next move is likely to be to cut.”

John Choong, senior equity research analyst at Investing Reviews, also urged the Bank of England to pause rates again: "Considering the latest economic data, the Bank of England should err on the side of caution and opt for another pause, rather than pile more pain onto borrowers and consumers. While CPI remained stagnant in September thanks to higher services inflation, there have been encouraging signs that this is beginning to cool off. October's flash PMI showed that the services sector contracted with input price inflation continuing to slow. Although businesses reported having to increase their prices due to elevated wage pressures, this should begin to taper off with the latest wage growth data providing encouragement. Shop prices and food inflation have also fallen to their lowest levels since August 2022, according to the latest BRC data. And with the lower energy price caps kicking in, inflation is expected to have fallen meaningfully in October, putting the Bank of England back on track to hit its 2% inflation target."

But Kundan Bhaduri, director at The Kushman Group, suggested the MPC should really be focusing on whether to reduce rates: “The Bank of England needs to lower interest rates now or risk a long and painful recession. The focal point of contention for the MPC will be whether to raise the rate to 5.5% or maintain it at a seemingly prudent 5.25%. That is the wrong debate. The MPC should instead be voting on whether or not to lower interest rates to 5% or keep them at the current rate. The right course of action would be to lower rates on Thursday. Given that inflation is still way above the Bank’s target of 2%, it might seem odd to call for a cut to interest rates. It will certainly be a difficult call to explain to the public – and the Treasury – but it is the right one. Though inflation is still above target, it is much lower than where the Bank of England had expected it to be at this point. Money and credit growth have slowed significantly and need encouragement.”

Meanwhile, Amit Patel, director at Welling-based Trinity Finance, said the Bank of England should wait to see what emerges in the Autumn Statement before tweaking rates further: “The Bank of England should keep the base rate on hold at 5.25% without a shadow of a doubt. We have the Autumn Statement coming up very shortly so it would be prudent to wait and see what announcement the Chancellor has to make on the economy.”

But others warned another hike could still be coming, which would “blowtorch” the economy. According to Stephen Perkins, managing director at Norwich-based mortgage broker, Yellow Brick Mortgages: “A hold decision is desperately needed but the fear is that with inflation proving sticky and above-inflation wage growth, the Monetary Policy Committee may vote for a 0.25% increase, further blowtorching the economy.”

In contrast, Luke Thompson, director at PAB Wealth Management, said he would prefer the Bank to hike to give it the headroom to cut rates sooner: “I think that the Bank of England will hold the rate tomorrow whilst they wait on the impact of previous rate rises. I would prefer the Bank to go for a further rise. My thoughts on this surround inflation and the fact the figures still don't make for great reading. I think despite all the issues around previous rate rises, we are now in a position where we need to stamp down on inflation as hard as possible and a couple more rate rises would help with this. Hopefully, by going harder now and squeezing inflation we will see greater benefits in the longer term with the potential for rates to decrease to lower levels and potentially sooner than is currently being predicted giving more headroom to the Bank of England. My concerns are that if they ease off now and inflation remains stubbornly high, rates will end up being higher for longer than they need to be.”

Gary Bush, director at the Potters Bar-based MortgageShop.com, would like to see the MPC wait on the next set of inflation data: “From our side of the table, the Bank of England definitely needs to hold at 5.25% at tomorrow's meeting. While the inflation figures are still high, things are improving so we'd like to see the next round of CPI data before they consider another base rate increase. If they take this approach, we could well see a much-needed lift in sentiment across the UK as 2023 draws to a close.”

Wes Wilkes, CEO at Net-Worth NTWRK, agreed: “The Bank of England should, and certainly will, hold rates as they are. It would also be great if they left it at that rather than provide any additional bumbling and stumbling messages about future moves or guidance.”

Meanwhile, Samuel Mather-Holgate, director at Mather and Murray Financial, was withering in his assessment of Threadneedle Street: “The Bank of England has no idea of its destination. It continued raising rates for too long and will continue to hold them there for too long. Its policies will damage the economy and instigate a housing crisis like we haven't seen for decades. Most of the pain the Bank has inflicted is yet to be felt by homeowners, but when the poison filters through there will be real socio-economic damage done and the next government will have a broken society to put back together.”

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