"The MPC’s decision to freeze rates again suggests that there is not enough solid evidence in the economy to call for a shift. Despite speculation that a rate rise looms, it is unlikely that this will happen until economic indicators show a more consistent, clearer pattern. Indeed, while a quarter point rise in the future cannot be discounted completely, we believe the current rate probably represents the peak of this interest rate cycle.
"House price data this month has been mixed. Nationwide reported that prices in March fell by a seasonally adjusted 0.6% while Halifax reported a 0.5% rise. The general sentiment, however, is that house prices have now stabilised and any material drop in prices, as some speculated, is extremely unlikely.
"In terms of mortgage lending, the BBA reported an increase in gross mortgage lending in February (£11.9bn), 3% higher than in January, while the CML reported that lending remained fairly flat, virtually unchanged from January’s figure of £17.3bn. These figures were largely expected given the traditionally slow winter months; however, a seasonal spring pick-up in activity is on the cards — though at more normal levels than last year.
"Consumer confidence continues to be shaky as reflected in March’s retail figures. The CBI report confirmed another weak month on the High Street with retailers saying sales were the worst for 13 years. While the report doesn’t include the Easter break, traditionally a strong weekend, it does suggest that the consumer slowdown is persisting. There was little pressure, therefore, for the MPC to further restrict activity at this time.
What should borrowers do now?
Bitner continues: "There is currently little to choose between fixed and discounted rates so it really comes down to borrower sentiment and whether they think rates are likely to rise or fall. However, with SWAP rates starting to fall again, it may be worth those borrowers looking to fix to hold off a while as more competitively priced products are likely to be launched over the coming weeks.
"If borrowers are uncertain as to what may happen with rates then they should perhaps look at opting for a competitive short-term discounted product, such as our exclusive at 4.30%1, that carries no redemption charges so they can easily switch to another product should rates move. Or they should perhaps look at capped rates which means they can benefit from any fall in rates yet still have a level of protection as well."
