04.03.10 by Andrew Montlake
No surprises as Bank of England maintain base rate at 0.5%
To all intents and purposes leaving the Bank of England Base Rate on hold for another month may seem to be a no brainer and worth no more than a cursory glance. However, like all things financial at present it just ain’t that simple!
There are currently so many opposing forces at work that seem to be cancelling each other out, but there are an increasing number of factors that are beginning to point to one side emerging victorious.
As the Conservatives continue to embrace the “Devon Loch” approach to electioneering, the chances of a Hung Parliament are increasing, which is making the city nervous and putting intense pressure on the Pound. The prospect of speculators of doom making the UK their next target and the loss of our AAA rating are scary scenarios.
However, there was some slightly better news as the updated GDP figures for the UK showed a slightly stronger growth than first thought in the last quarter, revised upwards from 0.1% to 0.3%, and there have been three interesting events elsewhere which point to a rise in interest rates sooner rather than later.
First of all there were some interesting notes from the Shadow MPC, which meets “under the auspices of the Institute of Economic Affairs”, with three of the members voting, nee urging, an immediate 0.5% rise.
Secondly, amid reports of stronger than expected growth in the US, the US Federal Reserve surprisingly increased interest rates for emergency bank loans. This is important as it is seen as a sign that the Fed could soon raise other key lending rates, citing "continued improvement in financial market conditions" as the reason for its move.
More important was the following phrase, “these changes are intended as a further normalisation of the Federal Reserve's lending facilities".
Thirdly, there have been some interesting moves elsewhere around the world. Australia, for example, have just increased their interest rates to 4%, their fourth increase since October stating that
"Rates can't stay at emergency levels forever" and “are an inevitable consequence of a recovering economy that is outperforming the rest of the world."
Of course all this is fine and dandy, but whilst economists all over the UK still have very different views it may be that events elsewhere mean that that we may have no alternative but to begin raising rates sooner than expected.
What does seem clear, as we approach an election and a World Cup, (two events that I believe are significant in terms of the good or bad feeling they can produce), is that those looking for mortgage finance are likely to find better deals this half of the year than the latter.
As prospects of a second mortgage shortage increase as lenders struggle to get the funds to lend, following the withdrawal of Government funds, even if the Bank of England leaves Base Rate unchanged this points to lenders needing to raise their rates further.
For now, the amount of good products available and increasing competition means that the time is right to secure a good rate.
Monty’s Mortgage Blog
29.07.10
House Prices & Lending To Individuals
The frustration felt by many individuals that banks still do not seem to be lending in sufficient quantities is still evident in the latest Lending To Individuals figures from the Bank of England, which explains the frustration felt by many would-be borrowers.
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