“I don’t really think he will be able to show up to Parliament if the Bank of England base rate goes up, because now he has taken the role of the country hero that’s lowering the cost of living,” Moustafa told Mortgage Introducer. “He speaks all day about cost of living. It’s impossible to raise the Bank of England base rate when all day you speak just about cost of living.”
Does a base rate hold actually help borrowers?
The Bank of England held its base rate at 3.75% at its July Monetary Policy Committee (MPC) meeting. Moustafa said the hold – however politically convenient – is creating a damaging disconnect for borrowers. Clients arrive expecting rates close to 3.75%, only to be told by lenders the best available is closer to 6%.
“People are a bit disappointed, confused, and they don’t really understand what’s happening,” she said. “They come in under the expectation that the base rate is 3.75%, and then all of a sudden, they realise it’s, ‘Sorry, we can’t do 3.75%, we can only do 6%’. We just have to tell them to ignore the Bank of England base rate, and we just follow the lenders.”
Moustafa is clear political interference in monetary policy is wrong in principle. “From the start, putting pressure on the Bank of England is wrong. Absolutely wrong. It’s not the right economic decision. We shouldn’t be doing that. It should run independently.”
But she does not believe independence will necessarily win out. What she sees instead is a standoff. “We are going to see whose pressure is higher. Can banks put on more pressure, or can Westminster put on more pressure? We will just find out.”