Today's announcement by the Bank of England monetary policy committee (MPC) that interest rates are to stay put at 5.75 per cent has come as a considerable relief to many
United Kingdom of Great Britain & N. Ireland (Press Release) August 7, 2007 --
Today's announcement by the Bank of England monetary policy committee (MPC) that interest rates are to stay put at 5.75 per cent has come as a considerable relief to many, including the business community, with the Confederation of British Industry's head of economic analysis, Doug Godden, who has said the case for a rise, now or in the near future, is "far from clear." In its response to the decision, Scottish Widows have said any further rate rise would be "unnecessary".
It has been most felt, of course, among those involved in the housing market, be they home owners relieved not to see their variable mortgage payments increasing again or lenders and estate agents concerned at the prospects for the housing market should rates increase to six per cent or beyond. National Association of Estate Agents chief executive Peter Bolton King said he was glad the Bank had not "jumped in too early" and moved before the impact of July's rate rise had been fully established. Furthermore, he called for the MPC to "err on the side of caution and maintain rates until the end of the year to allow consumers and the market time to adjust."
There are some who are far from optimistic that rates will be on hold for long, including many economists and mortgage broker Cobalt, which said another hike was still "on the cards", but Ray Boulger of mortgage experts John Charcol said: "Today's decision may well signify that rates have reached their peak and that the next movement in bank rate will be downward, albeit not until next year."
The overall evidence, for now at least, appears to show it is. This may not be immediately clear, however, from the contradictory evidence of the last few days. On mortgage lending, the Bank of England figures for June saw an increase of £9.55 billion, up from May £8.75 billion, contrasting with British Bankers' Association figures indicating a drop in net lending from May's £5.83 billion and a recent monthly average of £5.3 billion to £5.06 billion.
However, both contradictions can be explained in a way which gives a clearer picture of the trend. The Council of Mortgage Lenders pointed out that total advances hit a record £34.2 billion in June as fixed rate deals ran out and customers remortgaged, a blip that would not repeat itself in July. As for the Halifax figures, the bank's own chief economist, Martin Ellis, said that four successive monthly price rises below one per cent were the more significant figure and the impact of the rate rises already made in the past year was taking hold.
However, Mr Ellis added one caveat: That "sound economic fundamentals" plus a lack of available property and high employment rates would continue to prop up the housing market. If so, this should come as a relief, for it will show that while the housing market is indeed in slowdown, it may also be able to weather any further rate rises if they do occur.
It has been most felt, of course, among those involved in the housing market, be they home owners relieved not to see their variable mortgage payments increasing again or lenders and estate agents concerned at the prospects for the housing market should rates increase to six per cent or beyond. National Association of Estate Agents chief executive Peter Bolton King said he was glad the Bank had not "jumped in too early" and moved before the impact of July's rate rise had been fully established. Furthermore, he called for the MPC to "err on the side of caution and maintain rates until the end of the year to allow consumers and the market time to adjust."
There are some who are far from optimistic that rates will be on hold for long, including many economists and mortgage broker Cobalt, which said another hike was still "on the cards", but Ray Boulger of mortgage experts John Charcol said: "Today's decision may well signify that rates have reached their peak and that the next movement in bank rate will be downward, albeit not until next year."
The overall evidence, for now at least, appears to show it is. This may not be immediately clear, however, from the contradictory evidence of the last few days. On mortgage lending, the Bank of England figures for June saw an increase of £9.55 billion, up from May £8.75 billion, contrasting with British Bankers' Association figures indicating a drop in net lending from May's £5.83 billion and a recent monthly average of £5.3 billion to £5.06 billion.
However, both contradictions can be explained in a way which gives a clearer picture of the trend. The Council of Mortgage Lenders pointed out that total advances hit a record £34.2 billion in June as fixed rate deals ran out and customers remortgaged, a blip that would not repeat itself in July. As for the Halifax figures, the bank's own chief economist, Martin Ellis, said that four successive monthly price rises below one per cent were the more significant figure and the impact of the rate rises already made in the past year was taking hold.
However, Mr Ellis added one caveat: That "sound economic fundamentals" plus a lack of available property and high employment rates would continue to prop up the housing market. If so, this should come as a relief, for it will show that while the housing market is indeed in slowdown, it may also be able to weather any further rate rises if they do occur.
Email
Print
SPAM
