As we settle back into our comfy office chairs, switch on our laptops and sharpen our metaphorical pencils once more, thoughts of the summer sojourn seem to melt away like a pipe dream.
Much of the debate among economists is around the so-called death of the Phillips Curve, a simple method for looking at the relationship between inflation and unemployment. This breakdown in the current climate, where artificial support has been pumped into the economy gives them cause for concern especially as they begin to look at how economies will react when this support is withdrawn.
Although inflation is still above the target rate of 2%, the Bank of England were probably right to ignore some distant clamour for a rate rise just yet as they continue to leave rates on hold. In fact, despite the fact that many economists believe inflation will peak at just below 3% in October, the vast majority also believe that there will be no rate change until 2019 – especially whilst Brexit is being sorted out.
There are a couple of dissenters who think there could be a small change next year, but the consensus is we still have a long way to go in the current low rate environment.
This is of course still good news for borrowers, (although not for those saving for a deposit), with lenders still eying their lending targets as the year-end draws closer.
However, we do not need an actual Base Rate change to lead to higher rates and talk has turned to calls for the Term Lending Scheme to end amidst concerns it now just helps inflate borrowing levels to unsustainable levels and encourages bad habits. It has served its purpose, helping lenders lend to the right people and pass on the low rates available which has made a difference, but the question now is how do we begin to wean everyone off the medicine that has become rather too addictive.
The big worry is that sudden rate rises, particularly if they are quicker and higher than anticipated, will cause a huge issue to those used to the current environment and so there is a case for looking at withdrawing this support now as a first step and allowing the lending market to start to stand on its own two feet again.
Meanwhile, August for Coreco was one of our best months and shows that there has been no real let up, especially where remortgages are concerned. What is good is that First Time Buyers are also doing well and with the Buy To Let changes coming in next month, September looks set to be a very busy time.
Rate wise we are now seeing 2-year fixes from 1.03%, (3.35% APRC) and 5-year fixes from 1.59%, (2.93% APRC). Buy-To-Let products are available from just 1.28%, (4.01% APRC) for a 2-year fix.