The Monetary Policy Committee (MPC) today voted to hold interest rates at 0.5 per cent for another month and to maintain the size of its programme of asset purchases at £375 billion. But what was really interesting about the first meeting under new Governor Mark Carney was that the MPC also told the financial markets that they were wrong about the likely timing of any rise in interest rates.
The statement which accompanied the rate decision gave the clearest indication yet that rates will not be rising anytime soon. This will reassure borrowers who may have been concerned that the fluctuating Swap rates seen last week meant that mortgage rates would be rising sooner rather than later.
The Bank of England said that while there are signs of a recovery in the UK, it ‘remains weak by historical standards and a degree of slack is expected to persist for some time’. So what does this mean? Well, in the Committee’s view ‘the implied rise in the expected future path of Bank Rate was not warranted by the recent developments in the domestic economy’. In other words, bond yields have risen too high in recent weeks on the back of fears that the US was about to slow its stimulus programme, and that the UK would follow suit.
The Chancellor of the Exchequer had asked for such ‘forward guidance’ ahead of the Committee’s August meeting, whereby it would inform the markets that it intends to keep interest rates at 0.5 per cent for a certain period of time. Governor Carney has decided to introduce this transparency ahead of next month’s meeting, which bodes well. .
As far as mortgages are concerned, while one or two lenders rushed to pull products on the back of rising Swap rates – with a view to repricing higher – attractive rates continue to be introduced. For example, one lender is launching a lifetime tracker tomorrow, pegged at 2.19 per cent above base rate, giving a pay rate of 2.69 per cent. There is just a £495 fee and it is available to those with a 25 per cent deposit.
There are plenty of other competitive rates available. Get in touch for more details.