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Inflation, Stagflation, Low Rate Nation…

22.08.11

As another Middle East country looks like it has undergone a regime change things in the UK seem to be quiet for once. Oil prices have fallen on the expectation that the end of the Libyan conflict could mean a return to oil production soon which should in time play through to inflationary figures.

Not that inflation is worrying the Bank of England as all 9 members of their committee that sets interest rates decided unanimously to keep rates on hold last month. This represents a small sea-change as at one stage at least 3 of the members were voting for an immediate rise, (although the main protagonist calling for rises has now left the committee of course).

The evidence of slowing growth and the issues in the financial markets, coupled with reports that suggest home finances fell for 40% of households in August, have been enough to put back rate rises to next year, if not beyond.

The biggest discussion point now is whether Quantitative Easing, the much heralded QE3, will be seen at some stage soon, with even some speculating that Bank Base Rate will be cut even further.

Talk of “a lost decade” and a “Japanese era” are being whispered with growing concern as has the much dreaded term “Stagflation”. The Wikipedia definition is that this “is a situation in which the inflation rate is high and the economic growth rate is low. It raises a dilemma for economic policy since actions designed to lower inflation may worsen economic growth and vice versa.”

The issues that such a period can cause are often seen as more difficult than dealing with straightforward inflation. However, whether or not we do indeed fall into a new recession, or whether this is just actually a continuation of the first one, it is what it is.

All this means that at present mortgage rates continue to be ridiculously low and the financial cost of purchasing a property, especially compared to renting, remains more affordable than it has been for a long time, (as long as you can raise that much needed deposit of course).

On the back of these low rates, especially the longer-term ones, we are seeing a steady increase in remortgaging, after all, when you can fix for 4 years at 2.99% or for 5 years at 3.39% for example, the benefits in years 3, 4 and 5 could potentially be massive.

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Andrew Montlake

Written by Andrew Montlake

Andrew Montlake, better known as Monty, began his journey with an Hons degree in Economics & Politics before starting in the mortgage industry in February 1994. As a main founder of Coreco in 2009, he successfully grew the brand, marketing, and communications, and was made MD in 2019 focussing on the overall vision, strategy, and culture of the company. As Coreco’s media spokesperson, Andrew can often be seen or heard on TV and radio as well as regularly commenting in the national, local, and trade press. He is the author of this acclaimed Mortgage Blog and is well-known for his social media, podcasts, and public speaking. Andrew is now proud to serve as Chairman of the Association of Mortgage Intermediaries, (AMI) as a cheerleader for the Mortgage Industry as a whole and continues to work at the coal face, writing mortgage business and advising clients.

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