It’s been a month of uncertainty with FIFA in crisis, further conflict in the Middle East and today Greece returned back to the Eurozone for a further bailout
with the major risk it may ditch the Euro and return to the drachma.
Even the Spanish cucumber doesn’t appear to have escaped the fallout with international public health concerns over an E-coli scare now focusing less on the Spanish and more on German beansprouts. Closer to home, the Coalition fallout over the alternative vote referendum may start to unravel and the harmony and consensus over cuts in public spending and the strength of the improving economy appears to be demonstrating signs of fracture. The biggest issue for our clients remains the question of interest rate rises. Inflation is beginning to spike, yet the economic growth remains fragile. Even the experts on the Bank of England Monetary Policy Committee are split on what to do.
The freeze on wages coupled with rising food, gas and petrol prices has led to one study confirming that actual disposable income for UK citizens is now lower in real terms than at anytime since the 1970’s. That is the lowest in 40 years. We’re not necessarily in agreement with that research, but it does show that the austerity measures are beginning to bite. In light of these difficulties, a number of commentators are stating that rates will not change for another 12 months, others say they will rise ’slowly but surely by the end of this year. If two views weren’t enough, the splinter group predicts that rates will have to rise a lot quicker than expected next year even though this will cause a political and financial fallout.
UK interest rates calls are now impossible as the ‘consensus’ changes almost monthly. As a mortgage broker and not Government or private economists, internally, we do see at least one rate rise in the next few months. The fact remains that if borrowers are cautious and want certainty, they should fix. If they are willing to take a gamble and want to minimise their monthly payments, then they should consider a tracker – as in the short term, they are clearly cheaper. There are now products from both the Woolwich and today announced by Yorkshire Building Society, which even the commentators would likely agree and that is the ‘Track and Fix.’ This allows you to track whilst rates remains low and to fix at any time without penalty once they rise rates start to increase. Some certainty in an uncertain world!