The comments come as Mark Carney in a speech on Tuesday confirmed that there would be no immediate interest rate rise due to an “unforgiving” global economy 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 – and beyond.
There always seems to be a stream of important reasons for the Bank to keep the rate unchanged.
Mr Coady continues: “I think the earliest we can now expect a rate rise will be in 2017. This is primarily because headline CPI inflation is almost back to zero and because whilst UK GDP growth is steady, current forecasts for wage growth in 2016 of 3.75 per cent look very optimistic. And when interest rates do eventually rise, there is little reason to expect a return to the rate levels of before the credit crunch.
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.”
