Mortgage Introducer contacted a number of mortgage market professionals in the prelude to the interest rate decision on Thursday to find out how they thought the Bank of England’s Monetary Policy Committee will vote.
The general consensus was that the MPC would not change interest rates but there was a disparity among professionals on when precisely the Bank of England would raise interest rates.
In May Morgan Stanley Research said that it expected to see the Bank of England raise rates in August, contingent on a pick up in wage growth over the next few months. The analysts at the investment firm expected interest rates to be at 1% at the end of 2011 and 2% at the end of 2012.
But Edward Checkley, broker at Private Finance, said: “My prediction would be very much in line with everyone else’s. It’ll stay at 0.5% this Thursday however I’d probably say by the end of the year perhaps we’ll see a quarter to half percent rise and by the end of 2012 interest rates should be at about 2%.
“In regards to how this affects mortgage advice which brokers provide, we know interest rates will go up but we don’t know how soon it will go up. We’ll have to wait untill the economy picks up first before an increase in rates is appropriate.
"Trackers are still the best option so long as they’re flexible, that way they can really be taken advantage of. Take up a mortgage with a high margin now which is at a very low tracker rate so that when base rate goes up, the costs should start to decrease and remortgage can still be an open option.
“It’s tricky to say when interest rates will go up. There may be a quarter percent increase in the late months of the year and that can easily spill over into next year so I would guess with the downward pressures we’re seeing now, January would be my best bet and we’ll see 2% rates by the end of 2012.”
John Malone, chairman at PMS, added: “I think they will stay the same certainly through till Autumn. The first time when I could see an increase is potentially November, if not then February next year. We’re certainly staying where we are at the moment for now.”
Michael Fitzgerald, sales director at Brentchase Financial Services, said: “I think they will go up soon and it all depends on how the Bank of England hold their nerve against the hawks who are seeing inflation although most of it comes from external sources which are the main threat to our economy.
“They won’t rise on Thursday but along with other people that I speak to, I would expect that September, October would be the more optimum time but of course nobody can really tell. The oil price has put a real big spike in it but there’s going to be an explosion of gas exploration and we’re expecting a higher production of oil which will hopefully drive the price of oil and inflation down.
“Medium-term I think we will get back to 4% BBR that is still traditionally very low and I expect we’ll see that at around September next year.”
Tony Ward, chief executive at Homefunding, said he didn't expect rates to rise for "some time".
He added: “I don't see interest rates rising for quite some time now. While everyone would like to see interest rates rise, the Bank of England must ensure that the market remains stable and we don’t want to see unemployment and repossession levels increase further.
"In the letters published by Mervyn King, it looks as if he's taking a very long view on the stable growth of Sterling so with all the pressures we’re seeing now, I’d say a quarter percent interest rate rise will likely come in February of next year.”
