Contractor specialist mortgage broker Contractor Mortgages Made Easy has decided to hold its own version of The Bank of England’s Monetary Policy Committee.

The economy has seen some very unusual activity in the last few months, and as a result the base rate has been kept low for a long time. Many economists believe that this is due to go up but none have a clear idea of when.

As a result, we here at Contractor Mortgages Made Easy have decided to hold our own Monetary Policy Committee meeting. Two days ahead of the Bank of England’s base rate update, the members of the panel shared their thoughts on the upcoming announcement.

Taj Kang, Associate Director

PREDICTION: RATE HOLDS AT 0.5% IN MARCH

The minutes for the last Bank of England Monetary Policy Committee (MPC) meeting stated 3 members voted for an increase in the base rate. 5 votes are needed for a majority decision to make an increase a reality. I feel that this will happen in May, and there will be a new base rate of 0.75% as a result. April is a key trigger month for upward pressure on inflation, mainly due to tax and duty increases. This will translate into pressure for the MPC for May, where I think we will have a minimum of 5 \”yes\” votes from the 9 members.

Andy McBride, Associate Director

PREDICTION: RATE HOLDS AT 0.5% IN MARCH

It is a very difficult one to call at this stage. There are a number of factors that suggest a rise could be immanent, such as inflation at 3.1% well above the long term government target of 2%. Weak sterling figures are also adding inflationary pressure.

Arguments to keep rates low are also strong, experts argue that the economy is so week that rates need to be kept low for the foreseeable future. With a number of cash strapped households currently stuck on lenders standard variable rates due to the decreases in their property value, the government must be all too aware that any increase in bank base rate could cause another round of mass repossessions.

My personal view is that rates will remain at 0.5% until Q2 – Q3 with a gradual rise to 2% over the following 12 months, but in this ever changing economic climate, nobody really knows.

Rebecca Sidwell, Senior Mortgage Consultant

PREDICTION: RATE HOLDS AT 0.5% IN MARCH

In my opinion, I anticipate that the base rate will stay the same again this month. My reason behind this is due to figures pointing to nominal drop in house prices last month, and based upon where the economy is in terms of the fall in GDP, and inflation figures at a record high, I cannot see anyone wanting to actively encourage the housing market to slow down, which is what I would anticipate happening if the base rate goes up. I think if there is an increase, this will worry prospective contractor mortgages purchasers, and lead to a halt in purchase activity, until there is more certainty with lending.

Susan Grant, Senior Mortgage and Protection Consultant

PREDICTION: RATE HOLDS AT 0.5% IN MARCH

Due to the rise in unemployment and the cost of living being so high I do not think that they will raise interest rates until September this year.

Ben Rogers, Senior Mortgage Consultant

PREDICTION: RATE HOLDS AT 0.5% IN MARCH

I believe the base rate will be held in March. Whilst inflationary pressures are mounting for Base Rate to be increased to calm inflation down, I believe with the economy is not in a position to deal with a rise in interest rates just yet. Having passed one of the key trigger months (February, with the other months being May, August and November) in which Base Rate is more likely to rise I believe it will be the latter stages of this year before we see any rate increases.

With a large volume of UK mortgages on a variable rate and the economic climate still uncertain, I believe a rate increase now will do more harm than good. Whilst traditionally a rise in interest rates is the common method used to bring inflationary figures down, the VAT increase as of January 1st is a significant contribution towards these figures being higher than the government targets. I believe that whilst this is something the Bank of England committee will keep an eye on, they may not jump to any panic increases just yet knowing that the inflation is predominantly higher because of the VAT hike.

Steven Lambert, Senior Mortgage Consultant

PREDICTION: RATE HOLDS AT 0.5% IN MARCH

In on-going reading of various economic commentaries, it appears that the markets, economists and other leading experts have had a poor record of predicting rates in the past few years. This said, and in the absence of a crystal ball, the consensus seems to lean toward a relatively imminent 0.5% hike. Last month three members of the MPC were in support of a hike. Going forward, only time will tell as to when inflationary pressures and economic stability concerns lead the other 6 members to follow.

The Verdict

The overall opinion of the panel is clear – The base rate to remain at 0.5% in March

It seems pretty conclusive, they are all agreed that the base rate will remain the same this month. We will have to wait and see to find out if this is correct.

Author Bio: This article has been submitted by Contractor Mortgages Made Easy

Category: Finances
Keywords: mortgages, contractors