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Bank of England Likely to Hold Interest Rates at Current Level in MPC Meeting

Bank of England Likely to Hold Interest Rates at Current Level in MPC Meeting

Uncertainty within the UK housing market is still harboring all the attention as inflation is on the rise, but not enough to push the Monetary Policy Committee to increase the base rate in their monthly meeting this coming week. The Central Bank appears unanimously in favour of holding interest rates at the current low rate of 0.25%. This will be transpiring as Article 50 could be triggered as early as Tuesday.

Inflation is rising and that is creating speculation from a mounting number of experts regarding the possibility of a rise in interest rates in the months sooner compared with later. Although it is a norm for interest rates to rise with a move in inflation, now is a different time. A number of the MPC are quite uncomfortable with rising inflation, but cannot increase the base rate without understanding the full effect from Article 50 on the housing market.

Howard Archer at IHS Global Insight commented on the possible rate rise, saying: "We believe the Bank of England will remain pretty tolerant on the inflation overshoot given the prolonged, highly uncertain outlook that the UK economy is likely to face as the Government negotiates the exit from the EU."

A rate rise will surely affect remortgage activity which currently is at a high level and has been for several months. Many house owners are still benefitting from low interest rates and are continuing to save money off the cost of their monthly mortgage payment through attractive lender deals.

Archer continued: "While we believe the next move in interest rates will be up, we do not see this happening before 2019 and it could very well be delayed beyond then."

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