Bank of England get Serious on Interest Rate Rises

Through the large, heavy iron doors at the Bank of England and down the hallowed corridors there is a room where the Monetary Policy Committee meet to discuss whether interest rates will ever change again. Could there finally be some real movement in that room from Committee members?

Whilst last month there was again no change, the perennial crier of “wolf”, Governor Mark Carney, was at it again by mentioning that there is every chance there may well be a rate rise this year, perhaps as soon as November. What was different from the usual ramblings this time was the whole tone of the rhetoric.

Whilst we have heard this many times before of course, (this may indeed just be another way of trying to strengthen the £, which has certainly worked), this time does feel a little different. Mainly because you now have people like Gertjan Vlieghe, an external member of the Bank’s rate-setting panel and normally associated with more doveish comments, saying that a rise of more than 0.25% may well be needed.

There are still concerns that the Economy may not be quite ready, as well as the seemingly endless Brexit shenanigans clouding everything, but there have been some signs of economic improvement recently and they are getting more concerned that inflation will actually break the 3% level soon.

Either way the Bank is now talking itself into a corner and if they are seen to be crying wolf yet again, their credibility will be shattered and markets may simply ignore them in future.

The problem is undoubtedly the fact that debt levels are extremely high and a hike could pose a risk to consumers on the edge and cause consumer spending to retract sharply. There are a good many economists who still believe inflation will fall again soon whilst the risks to the economy of Brexit are still being “downplayed”.

It is a tricky situation, but there does seem to be some need to at least start the process back to normality, whatever that is, and reversing the last cut which many feel was unnecessary.

Whatever happens, we are likely to see this reflected in mortgage rates soon despite the competitive pressure that pervades the current environment, so it is a good time to act now.

Currently there are still 2-year fixes available at 1.03%, (3.35% APRC) and 5-year fixes from 1.59%, (2.93% APRC) whilst variable tracker rates are around from 0.99%, (3.28% APRC).

Those looking at a Buy-To-Let can obtain products from just 1.28%, (4.01% APRC) for a 2-year fix.

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