Yorkshire Housing chief calls on Bank of England to be bolder on interest rates
The chief executive of Yorkshire Housing has called on the Bank of England (BOE) to be bolder in its approach to interest rate reduction, warning that a decision not to cut rates could exasperate issues for housebuilders.
His comments come as the BOE is later this week set to announce its decision on interest rates, with consensus currently split about whether the bank will choose to hold or lower them. The Monetary Policy Committee (MPC) – the group behind the decision – have already lowered rates five times since August last year.
But speaking to The Yorkshire Post, Nick Atkin, chief executive of Yorkshire Housing, called on the bank to take bolder action around interest rates.
He said: “The Bank of England is being overly cautious in its approach to interest rate reduction, and that has now got us to a position where it is doing more harm than good.
“During a normal economic cycle, interest rates are used as a lever to control inflation, and normally the drivers of inflation are that there is too much money in the economy and too many people spending too much money.
“But the drivers of inflation in this economic cycle are not UK related, they are oil prices, food prices, energy prices, all of which are outside the UK economy. And when you look at the uk economy, its flatlining and had flatlined for over 12 months.”
Barclays and Goldman Sachs have predicted that the BOE will choose to lower interest rates on Thursday when the decision is announced.
Mr Atkin’s comments came as the housing association released a new paper calling for rates to be cut.
Though he praised recent action on housing from the Government, Mr Atkin added that many developers were now facing major issues.
He said: “The £39bn the government announced in the spending review, we absolutely welcome. We think that's a fantastic opportunity.
“But without a shift in approach, the money won’t go far enough. It certainly won't deliver at the scale and the speed the government needs, but more importantly, it won't deliver at the scale and speed the people across Yorkshire need.
“The other thing is that while financing costs are high, some new schemes no longer stack up. We’re seeing developers building homes who are then shelving whole projects and whole schemes, because the housing market has also flatlined. People aren't buying homes, so developers aren't building new homes.”
It comes after the BOE in July chose to hold interest rates at 4.25 per cent.
Speaking at the time of the announcement, Bank of England governor, Andrew Bailey, told PA news agency: “Interest rates remain on a gradual downward path, although we’ve left them on hold today. The world is highly unpredictable.”
Mr Bailey also added that there were “signs of softening in the labour market” – referring to indicators including slower hiring and wage growth easing. The MPC also cited uncertainty around Trump's tariffs amongst the reasons for its decision to hold interest rates in July.
Speaking on Yorkshire Housing’s latest paper, Patrick Murray, executive director (policy & external relations), Northern Housing Consortium said: “At the NHC, we are hearing from a growing number of our members that higher interest rates are slowing down development, squeezing budgets and making it harder for them to invest in new and existing homes.
“Lower borrowing costs would enable social landlords to improve our existing stock and help deliver the affordable homes communities urgently need.”
The Northern Housing Consortium is a membership organisation which aims to reflect the views of housing organisations in the North of England.