Bank of England could cut base rate if jobs market continues to slow
Companies are 'also having pay rises that are possibly less than they would have been if the NICs change hadn't happened', Mr Bailey said.
In an interview with the newspaper, the governor said the British economy was growing behind its potential.
This could open up 'slack' to bring down inflation, he said, meaning prices on goods would rise less swiftly compared with earnings in future.
Mr Bailey said he believes the base rate set by the Bank of England would be lowered in future, after it was held in June.
The current Bank rate of 4.25%, which has a bearing on all lending in the UK – including mortgages – will be reviewed again on August 7 by the Bank's Monetary Policy Committee.
'I really do believe the path is downward,' Mr Bailey told The Times.
He added: 'But we continue to use the words 'gradual and careful' because… some people say to me 'why are you cutting when inflation's above target?''
The governor's indication that lower lending rates and reduced inflation could be around the corner comes as the Government is facing pressure to improve living standards.
Ms Reeves' tax and spend plans are also being constrained by the current borrowing costs, as well as downgraded growth forecasts.
The Chancellor's fiscal headroom has been in part eroded by U-turns on the winter fuel payment and welfare reforms, as well as global shocks to the British economy.
Some in the Labour Party, including former leader Lord Neil Kinnock and Wales's First Minister Baroness Eluned Morgan, are calling for a wealth tax to help bolster the public finances.
On Sunday, Transport Secretary Heidi Alexander said such a tax had not been 'directly' discussed when ministers held an away day at the end of last week.
But speaking to Sky News' Sunday Morning With Trevor Phillips programme, she would not rule out tax rises at the autumn budget, only saying tax decisions would be made based on 'fairness'.
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South Wales Argus
14 minutes ago
- South Wales Argus
Reeves hails ‘instant impact' for aspiring homeowners as red tape is cut
More mortgages will be available at more than 4.5 times a buyer's income following recent Bank of England recommendations that some lenders can offer more high loan-to-income mortgages if they choose to. This will create up to 36,000 additional mortgages for first-time buyers over the first year, the Government said. Britain's biggest building society – Nationwide – announced last week that it is aiming to increase its high loan-to-income lending limit. From Wednesday, eligible first-time buyers can apply for Nationwide's Helping Hand mortgage with a £30,000 salary, down from £35,000, and joint applicants with a £50,000 combined salary – down from £55,000. It is estimated this will support an additional 10,000 first-time buyers each year. The changes will sit alongside the creation of a permanent mortgage guarantee scheme, delivering on a manifesto commitment, and a review of Financial Conduct Authority (FCA) lending rules that could allow prospective buyers' records of paying rent on time to be used to show they can afford mortgage repayments. Reforms will be outlined in Leeds ahead of Ms Reeves's Mansion House speech on Tuesday evening. Speaking in the City of London, the Chancellor is expected to say: 'I welcome the recent changes the (Bank of England) Financial Policy Committee has announced to the loan-to-income limit on mortgage lending, which the PRA (Prudential Regulation Authority) and FCA are implementing immediately. 'With an instant impact for consumers, such as Nationwide offering its Helping Hand mortgage to more first-time buyers – supporting an additional 10,000 each year.' Ms Reeves is expected to add: 'Today, I have placed financial services at the heart of the Government's growth mission. 'Recognising that Britain cannot succeed and meet its growth ambitions without a financial services sector that is fighting fit and thriving. 'And I have been clear on the benefits that that will drive. 'With a ripple effect that will drive investment in all sectors of our economy and put pounds in the pockets of working people.' Nicholas Mendes, mortgage technical manager at broker John Charcol, said: 'The decision to widen access to Nationwide's Helping Hand mortgage by lowering the income thresholds will offer an immediate and practical benefit to a group of people who have often found themselves just on the wrong side of affordability criteria. 'For someone earning £30,000 on their own, or couples on a combined income of £50,000, this change could be the difference between continuing to rent and finally being able to move into a home of their own. 'It acknowledges the gap between headline figures and real life, and it shows a willingness to make the system better reflect the pressures people are actually under. 'It will also bring particular value to those in stable, lower-paid roles that are so essential to society but are often overlooked by traditional lending models. 'People working in care, education, retail, and public service are typically in long-term employment and manage their finances carefully, yet they are the very people who have found the doors to homeownership closed to them. 'This reform suggests that financial discipline is being recognised more broadly than by salary alone, and that is a very welcome shift. 'Equally, the recognition that a person's history of paying rent should be considered when assessing their ability to repay a mortgage is something many in the industry have been calling for over many years. 'If someone has shown, consistently and over time, that they can manage rental payments at a level equal to or even above the mortgage they are applying for, then it stands to reason that this should be considered a reliable indicator of affordability.' Paula Higgins, chief executive of the HomeOwners Alliance, said the Government should 'turn its attention to fixing the Lifetime Isa (Lisa)'. She said: 'Right now, anyone forced to withdraw their savings early faces an unfair penalty.' Ms Higgins added: 'And the £450,000 property price cap hasn't moved since Lisas launched in 2017, despite soaring house prices, particularly in the South East. 'Reforming Lisas would make a real, practical difference to those trying to get on the ladder.' Henry Jordan, Nationwide's director of home said: 'Our changes mean more people, particularly those on lower incomes, could become eligible for a mortgage. 'We also hope our commitment to further lending provides a boost to the UK's housebuilding ambitions as well as encouraging other lenders to increase support for those looking for a home of their own.' Writing in the Daily Express, shadow chancellor Mel Stride said Labour 'has taken a wrecking ball to the economy and they are making life increasingly difficult for people up and down the country'. He said: 'Rachel Reeves will no doubt claim today that her plan is working, that she is on the side of working people and that she will help people get on the property ladder. 'But all she is doing is giving with one hand whilst her Labour colleagues take with the other. 'If Keir Starmer continues to roll out the red carpet for migrants, British people will not see the benefit of more home ownership. An ever increasing number of properties will go to foreigners and their families.'
Powys County Times
15 minutes ago
- Powys County Times
Reeves hails ‘instant impact' for aspiring homeowners as red tape is cut
First-time buyers are set to see an 'instant impact' from the drive to kickstart economic growth, Chancellor Rachel Reeves is expected to say. More mortgages will be available at more than 4.5 times a buyer's income following recent Bank of England recommendations that some lenders can offer more high loan-to-income mortgages if they choose to. This will create up to 36,000 additional mortgages for first-time buyers over the first year, the Government said. Britain's biggest building society – Nationwide – announced last week that it is aiming to increase its high loan-to-income lending limit. From Wednesday, eligible first-time buyers can apply for Nationwide's Helping Hand mortgage with a £30,000 salary, down from £35,000, and joint applicants with a £50,000 combined salary – down from £55,000. It is estimated this will support an additional 10,000 first-time buyers each year. The changes will sit alongside the creation of a permanent mortgage guarantee scheme, delivering on a manifesto commitment, and a review of Financial Conduct Authority (FCA) lending rules that could allow prospective buyers' records of paying rent on time to be used to show they can afford mortgage repayments. Reforms will be outlined in Leeds ahead of Ms Reeves's Mansion House speech on Tuesday evening. Speaking in the City of London, the Chancellor is expected to say: 'I welcome the recent changes the (Bank of England) Financial Policy Committee has announced to the loan-to-income limit on mortgage lending, which the PRA (Prudential Regulation Authority) and FCA are implementing immediately. 'With an instant impact for consumers, such as Nationwide offering its Helping Hand mortgage to more first-time buyers – supporting an additional 10,000 each year.' Ms Reeves is expected to add: 'Today, I have placed financial services at the heart of the Government's growth mission. 'Recognising that Britain cannot succeed and meet its growth ambitions without a financial services sector that is fighting fit and thriving. 'And I have been clear on the benefits that that will drive. 'With a ripple effect that will drive investment in all sectors of our economy and put pounds in the pockets of working people.' Nicholas Mendes, mortgage technical manager at broker John Charcol, said: 'The decision to widen access to Nationwide's Helping Hand mortgage by lowering the income thresholds will offer an immediate and practical benefit to a group of people who have often found themselves just on the wrong side of affordability criteria. 'For someone earning £30,000 on their own, or couples on a combined income of £50,000, this change could be the difference between continuing to rent and finally being able to move into a home of their own. 'It acknowledges the gap between headline figures and real life, and it shows a willingness to make the system better reflect the pressures people are actually under. 'It will also bring particular value to those in stable, lower-paid roles that are so essential to society but are often overlooked by traditional lending models. 'People working in care, education, retail, and public service are typically in long-term employment and manage their finances carefully, yet they are the very people who have found the doors to homeownership closed to them. 'This reform suggests that financial discipline is being recognised more broadly than by salary alone, and that is a very welcome shift. 'Equally, the recognition that a person's history of paying rent should be considered when assessing their ability to repay a mortgage is something many in the industry have been calling for over many years. 'If someone has shown, consistently and over time, that they can manage rental payments at a level equal to or even above the mortgage they are applying for, then it stands to reason that this should be considered a reliable indicator of affordability.' Paula Higgins, chief executive of the HomeOwners Alliance, said the Government should 'turn its attention to fixing the Lifetime Isa (Lisa)'. She said: 'Right now, anyone forced to withdraw their savings early faces an unfair penalty.' Ms Higgins added: 'And the £450,000 property price cap hasn't moved since Lisas launched in 2017, despite soaring house prices, particularly in the South East. 'Reforming Lisas would make a real, practical difference to those trying to get on the ladder.' Henry Jordan, Nationwide's director of home said: 'Our changes mean more people, particularly those on lower incomes, could become eligible for a mortgage. 'We also hope our commitment to further lending provides a boost to the UK's housebuilding ambitions as well as encouraging other lenders to increase support for those looking for a home of their own.' Writing in the Daily Express, shadow chancellor Mel Stride said Labour 'has taken a wrecking ball to the economy and they are making life increasingly difficult for people up and down the country'. He said: 'Rachel Reeves will no doubt claim today that her plan is working, that she is on the side of working people and that she will help people get on the property ladder. 'But all she is doing is giving with one hand whilst her Labour colleagues take with the other. 'If Keir Starmer continues to roll out the red carpet for migrants, British people will not see the benefit of more home ownership. An ever increasing number of properties will go to foreigners and their families.'
Telegraph
35 minutes ago
- Telegraph
Reeves pledges mortgage shake-up despite risk of surge in repossessions
Rachel Reeves will pave the way for a new era of risky lending in a push for growth that watchdogs fear could end in more people losing their homes. As part of her Mansion House announcement, the Chancellor will hail the biggest mortgage shake-up in a decade to boost homeownership and cut red tape. She is pressing ahead with the changes despite the head of the City watchdog warning just months ago that the push could 'go wrong' by resulting in a surge of repossessions. Under the plans, renters who have a good track record of monthly payments will be able to use this to prove to lenders how much they can afford to borrow, sometimes without the need for a deposit. Ms Reeves will also launch a permanent mortgage guarantee scheme to help more people get on the housing ladder. The proposals will be announced on Tuesday in front of an audience of bankers and City officials, including Bank of England Governor Andrew Bailey. It comes just days after Threadneedle Street announced it would relax lending rules for first-time buyers by changing a cap on the amount people can borrow. The Bank said this would allow 36,000 more mortgages to be issued at high loan-to-income (LTI) levels per year. Nationwide, Britain's biggest building society, has also cut the salary requirements for first-time buyers from £35,000 to £30,000, in a move it hopes will enable 10,000 more people to become homeowners. While the plans promise to bolster homeownership, regulators have argued they are in direct contrast with a pledge by banks to help borrowers meet monthly mortgage payments. Nikhil Rathi, chief executive of the Financial Conduct Authority (FCA), warned in January that 'things are going to go wrong' by relaxing regulation. This was on the basis that 'not everybody is going to play completely by the rulebook', adding that more risk would ultimately increase the likelihood of repossessions. 'When the mortgage charter came in last year, pretty much every major party said keep repossessions down, and we did,' Mr Rathi said. 'That is not consistent with relaxing the lending standards.' Ms Reeves, who is widely expected to launch another tax raid in the autumn, will insist on Tuesday that Labour is creating a country that is 'active and more confident' and a 'better-off' economy. She will also claim that financial services is 'at the heart of the Government's growth mission ... recognising that Britain cannot succeed and meet its growth ambitions without a financial services sector that is fighting fit and thriving'. However, Ms Reeves's annual Mansion House speech will not include details of a highly anticipated review of private sector pensions, which could result in workers and companies being forced to put aside more of their wages for retirement. The review will instead be launched next week, alongside an assessment of the state pension age. A series of reforms will also see the Bank of England review capital rules, while the senior managers regime that has for a decade forced senior executives to take personal responsibility for wrongdoing will also be made less onerous. In addition, the FCA's flagship consumer duty rules will also be reviewed to ensure they are not hampering growth in investment banks and pension funds. The City watchdog will also pare back rules to help companies list more quickly on the stock exchange amid an alarming exodus from the Square Mile.
