The Bank of England’s Monetary Policy Committee (MPC) has today held base rate at 0.5% again, as a rate hike appears to be slipping further into 2016.
The International Monetary Fund (IMF) yesterday revised their prediction for global growth for 2015 to 3.1%, down from 3.3% as predicted in July, in part due to Britain’s base rate increase now looking extremely unlikely to occur this year.
“Some months ago it looked almost a certainty that we would see a rate increase this year, likely sometime after the summer, however with market conditions this year stabilising, that has not materialised” says Taj Kang, Business Development Director at Contractor Mortgages Made Easy.
“It now looks likely to be at the earliest Quarter 1 of 2016, but even this could be an early prediction.”
With the IMF pointing to China, Turkey, Thailand and Brazil as ‘danger zones’ where borrowing has increased markedly, it says that global financial stability is not yet assured, due to risks from emerging economies, though this is stabilised somewhat by traditionally strong countries such as Japan, itself seeing something of a re-emergence of late, with the help of its quantitative easing programme.
For UK contractors, however, the risk is closer to home – quite literally. With rates increasing, there is a very real possibility of an overnight hike in mortgage repayments, which would spell trouble for many homeowners.
“Many of our clients have expressed concern at the fact that their mortgage payments could increase dramatically with a base rate increase, as many clients are still on historically low tracker rate mortgages, and the difficulties in obtaining new mortgage funding for contractors are still very real” added Taj.
“Whilst now is a good time for contractors with the emergence of lenders such as Nationwide and Virgin Money, there is a fine line to tread, as the minute that the MPC raises the base rate, mortgage rates will follow.”
“Best advice is clear. The historically low interest rates on offer at present, such as the exclusive rate that we have available with Halifax, fixed at 2.89% for two years with just a 10% deposit; will certainly not last beyond a rate increase. Act now to secure your short term financial future.”
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