February 4th, 2016
The Bank of England has today voted in favour of maintaining its present historic low of 0.5% for the bank’s Base Rate of interest.
It now means that one more month of stability will see the UK pass the seven year mark at which Base Rate has been at its current level.
It comes at the same time as Britain’s biggest mortgage lender reveals findings that show the housing market continues to thrive.
House price growth in the UK increased to 9.7% in the year up to January 2016, up from 9.5% in the 12 months to December, say Halifax.
The last time that figure was higher, they say, was in July 2014 when price increases passed the 10% mark.
The bank said that the average cost of a house or flat in the UK had now risen to £212,430, pointing to a recovering economy and a buoyant housing market.
One particular authority on global economy, however, says that suggestions of an imminent rate rise by the Monetary Policy Committee are wide of the mark, adding that the Bank of England governor had been “too aggressive”.
Dominic Rossi, global chief investment officer at Fidelity said that Mark Carney had confused the reasons for interest rates being so low, and suggested that deflation was more of a risk at present.
“The Bank of England’s inflation forecasts have been poor and therefore the guidance towards interest rates has been too aggressive at times and I think the fact the bank is now rolling back from yet another interest rate forecast illustrates the point.”
“”I think part of that criticism is about the whole case for forward guidance given the fact we live in a world which is highly unpredictable and where external forces can derail your economic forecasts pretty quickly.”
Speaking on behalf of Fidelity, the world’s second largest fund manager, Mr Rossi also commented that the United States Federal Reserve were right to increase interest rates in December.
“What did surprise me, and what I think was a mistake, was how forceful they were after the interest rate rise in presenting their case for future rate rises throughout 2016 – up to four”
“The market became very nervous about that forecast because when looking at inflation data in particular there’s no case for such an aggressive move which is having implications for the dollar with knock on effects on currencies, commodities and further price deflation.”
Article By: Mark McBurney, Senior Mortgage Consultant at Contractor Mortgages Made Easy
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