Photo: James Stringer
Mark Carney confirmed yesterday that the Bank of England will not rise interest rates in the near future, sparking optimism in the mortgage industry.
The governor of the Bank of England booted an interest rate rise “into the long grass and beyond”, says the boss of deVere Mortgages.
Carney attributed the bearish decision to an “unforgiving” global economy, as concerns surrounding China’s slowdown continue, and weaker growth in the UK.
Mike Coady, Managing Director of deVere Mortgages, observes: “The collapse of oil prices, weak economic performance in China, and the slow down in UK wages and growth, have made their mark on the Bank of England’s decision.
“Bearing in mind these serious concerns that won’t be resolved overnight, noting the language used by the governor in his statement, plus the fact that the MPC have voted to hold rates by 8 to1 means, I believe, that the first rate rise has been booted into the long grass.”
Coady predicts that the earliest a rate rise will happen is 2017, with current forecasts for wage growth of 3.75 per cent in 2016 look “very optimistic”. With rate rises still set to be introduced gradually, the delay is now expected to fuel demand for mortgages throughout 2016. Indeed, even with the seasonal slowdown in November 2015, house purchase lending remaind 18 per cent higher than November 2014, according to the Council of Mortgage Lenders.
“The justified expectation that ultra low interest rates are the new normal and the view that generally house prices across the UK are correctly priced in the current low interest rate environment, will fuel mortgage applications throughout 2016 and for the next few years at least,” he adds.