All change on rate rises

Posted on 9 September 2014

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All change on rate rises

How things change in such a short time!

As summer draws to a close and those chilly autumn mornings beckon, I’ve been thinking how quickly change can happen and transform completely the way things are perceived. Just last month the England cricket team hit rock bottom having slumped to an ignominious defeat to India at Lords, and were pilloried in the press as being worse than a village team. Yet just a few weeks later, they turned things around completely and emerged victorious in the series by 3 -1 having won the 3 games in a row, the last 2 within 3 days. All of a sudden everything’s all right again.

So it has been in the world of mortgages. Over recent months there has been increasing speculation, anticipation even, that there would be a base rate rise in 2014 and that it was imminent. So said the ‘experts’ in all the news.

However following a raft of pretty mixed economic data, including the Bank of England’s latest quarterly inflation report and comments from governor Mark Carney, the ‘experts’ have changed their tune and are now betting on the first half of 2015 to see the first rise in the bank rate since March 2009.

The only area that could be said to be putting pressure on the Bank of England to raise the bank rate is property prices. The Office of National Statistics (ONS) showed annual property inflation at 10.2% in June, slightly down on May’s 10.4% but still with London leading the way up 19.3% on the year. Yet when you strip out London and the South East, inflation for the rest of the UK was a more modest 6.3%. There has been some evidence that the housing market is cooling, including from Rightmove* who reported that asking prices in London dropped 5.9% in July. So the bank would seem to be comfortable to wait and see how the recovery pans out over the next few months. With inflation falling by more than expected to 1.6% in July and average wage growth at a miserly 0.6%, any immediate pressure to raise the bank rate that the Monetary Policy Committee was under has dissipated, despite two members of the committee voting for an increase in the August meeting. The smart money is now on the first rise taking place in the first half of 2015. Following the latest inflation report we have even seen some rates easing back down again, with 5 Year Fixes hovering around the 3% mark.

So as we move into autumn it is worth remembering that there’s still some hot deals out there. If you’d like to talk to one of our advisers about the best mortgage deal for you, just call us on 0844 346 3672.


Categories: Mortgages, Interest rates, House Prices, Mortgage Lenders


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