The Bank of England have again retained the base rate at 0.5%, but financial news this week does beg the question: for how much longer?
Markit Economics, an independent, global provider of some of the world’s most influential business surveys (called PMI surveys), released data on a booming UK services sector on Monday. The services sector contains a range of businesses, such as transport and IT, and is seen as a key barometer for economic recovery. The survey results outstripped predictions from the City, prompting talk of rate increases quicker than the widely mooted 2017.
The data released in PMI surveys is closely watched by the financial markets and help shape economic policy by providing some of the earliest signals of economic performance to central banks, including the Bank of England.
In addition to the services sector there were other numbers of note that could be of interest to contractors with a mortgage, or those thinking of applying for one in the near future. The Bank of England prediction of when rates are likely to increase has been thrown into serious doubt.
James Knightley, senior economist at ING Financial Markets, made the following observation of projected growth in the UK.
"It is difficult to believe that any other major economy will come close to that (of the UK) in the fourth quarter…It will also inevitably lead to further questions over whether the Bank of England seriously believes that it will be three years before the unemployment rate falls to 7%. We still think interest rates could rise in early 2015."
This prediction from Knightley leaves little over a year before rates could potentially increase. Those contractors who are looking to move shortly may be entering a very competitive property market in 2014, as schemes like phase 2 of Help to Buy fuel demand for prime residential property. Contractors who already have mortgages and no firm plans to move, may also be looking at their current low variable or tracker rates with trepidation of what may come.
Taj Kang, Business Development Director at Contractor Mortgages Made Easy, sees a great opportunity for contractors and freelancers to take advantage of the options that are currently available.
“The UK economic recovery continues to gather pace, with house prices and the services sector at the forefront. Construction of new homes has increased dramatically in 2013, and combined with Help to Buy and contractor-friendly mortgage options, contractors have the best opportunity for a long time to secure new homes on low mortgage rates with minimal deposits.”
“The current situation cannot be sustained indefinitely however, so it is a good idea to establish borrowing capacity early, and evaluate whether a longer term fixed rate is a good way to protect the mortgage payments from rate increases.”
Article By: Mark McBurney, Senior Mortgage Consultant at Contractor Mortgages Made Easy
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