Remember when the Bank of England’s MPC BBR decisions were so widely anticipated and had such potential for change, that there were industry ‘games’ where you could vote for what you thought would happen.

As the news of the MPC keeping BBR at 0.1% dropped into my inbox on 6 May, it barely made a ripple in the news pond. Consider how different it has been over (some of) our lifetimes.

In November 1979 rates rose to 17% and, over the course of the next 18 years, the lowest they ever got was 5.125%. It is no wonder that we talk of historically low rates in the current environment – indeed you would have to go back to the days of the credit crunch to see dramatic movement of rates, and that was downwards.

For six months running – between October 2008 and March 2009 – BBR was cut at every meeting, moving from 5% to 0.5% as the Bank attempted to stem the flow of confidence and credit out of the financial markets and the UK/worldwide economy.

It was seven years later – in the immediate aftermath of the vote to leave the EU in mid-2016 – before the Bank felt the need to anything, introducing a further attempt at confidence-building by cutting BBR to 0.25%. In 2017 it started to inch back up, this time to 0.75%, before it started its drop down to 0.1% as a result of the pandemic, where it has stayed for the past 14 months.

We have had BBR below 1% for over 12 years and we’re still at the lowest it has ever been. While we know the vast majority of mortgage product rates have no link to BBR, by dint of it being so low it still clearly carries an influence perhaps in terms of SVRs but also in terms of funding.

It’s somewhat hard to take in that some borrowers have never known a BBR above 1% in their home-owning lifetimes and there are plenty of commentators and economists who can’t envisage any sort of increase for the next four to five years.

However, in a recent presentation to Fleet by Dr. Savvas Savouri, chief economist and partner at the UK hedge fund manager, Toscafund Asset Management, the point was made that the MPC might actually need to take action sooner rather than later, and market stakeholders (or borrowers) need not be fearful of that move upwards. It will be a good thing.

Savvas described BBR at 0.1% as a “life support rate“ in that everyone should want to get off it, as you would if you were ill. It would be a sign of recovery. But, given the environment and the circumstances, why might that move come in the next 12-18 months rather than in say 2025 as many pundits predict?

Well, Savvas pointed to what many households/businesses, etc might have been doing throughout the course of the pandemic – the answer being, a lot less than they would normally. It’s therefore estimated that around a third of a billion of enforced savings have been made across the entire UK economy, and he estimates that when this amount is unleashed it creates an approximate £2.5 trillion boost. A significant amount of those enforced savings could penetrate into the purchase of property boosting prices, as a result of the supply not being able to meet demand.

Savvas believes this would create a problem for the Bank of England because clearly you do not want property prices running away with themselves. It may therefore feel it needs to put BBR up sooner rather than later and he suggests, that being the case, we shouldn’t be surprised to see a move to 0.75% within 12-18 months.

But, as mentioned, this won’t be something to fear. It will be a sign of a return to normality and it should not impact on what should remain a highly-competitive mortgage market. Plus, of course, we have a much better regulated mortgage/housing market than we did over a decade ago. Savvas doesn’t dismiss a housing ‘boom/bust‘ type scenario playing out but he doesn’t see it coming.

It’s a positive message to hear and one which suggests we will have a highly competitive housing market, fuelled by a low-interest rate situation for many years to come. Property as an investment is therefore likely to remain popular, and the need for advice in our sector has never been so great. The link between BBR and buy-to-let mortgage rates is not particularly strong, but we should not underestimate how powerful its influence can be right across the market.

Bob Young is CEO at Fleet Mortgages