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Interest rate outlook is ‘extremely benign’

Adam Williams
Written By:
Adam Williams

The Bank of England’s decision to keep interest rates at record low levels is likely to hold for some time, a mortgage broker firm has claimed.

The central bank’s Monetary Policy Committee yesterday voted 8-1 in favour of keeping the base rate at 0.5% earlier this week.

This follows considerable speculation about when the base rate, and subsequently mortgage rates, will rise.

Many had predicted an increase in rates at the start of 2016 but Simon Checkley, managing director of Private Finance, believes that rates show no signs of increasing in the short term.

“No rise in rates, low inflation outlook, upwardly revised growth forecast, reinforces our longer term message that the interest rate outlook is extremely benign, that rates will be staying low for some time to come and longer term rates will move very little,” he said.

“That coupled with British consumer confidence highest in 5 years, (global poll by Ipsos Mori), bode well for house buying. Our message is buy with confidence if you can afford to, however affordability remains and issue.”

Ian McCafferty was the only member of the Monetary Policy Committee who voted to increase the base rate. He advocated an increase of 25 basis points.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said it could be a long wait until rates increase.

“When it comes to forecasting the next interest rate rise, the markets have been consistently wrong for the past five years,” he said.

“Given that the recovery is still finely balanced, the enormous level of debt and lack of any real reason why interest rates should go up in the near future, we wouldn’t be surprised if rates didn’t go up until 2017, rather than next year.”