Rates Won't Rise Quickly - Carney

We are pleased to see Bank of England governor Mark Carney signaling Bank interest rate rises are a long way off.

The recovering UK economy in the last six months of 2013 has prompted growing talk of an interest rate rise from the Bank of England sooner rather than later.

Last August, Carney introduced a new policy insisting that rates would remain at rock bottom 0.5 per cent until unemployment falls below 7 per cent. The idea is that if unemployment falls below such a threshold then the recovery has taken hold and rates

As the economic news improved the likelihood of the 7 per cent threshold was moved forward to next year. Carney was forced to play down the impact of the 7 per cent level as a “threshold, not a trigger”, claiming it would not necessarily cause an increase.

In response Carney is now considering dropping the threshold to 6.5 per cent to further delay future rate rises.

Borrowers

We believe it is good news for borrowers who are facing a year of rising mortgage rates as Government support fades.

Carney is withdrawing the Funding for Lending scheme for mortgages at the end of the month.

This saw the Bank of England providing cheap loans to banks so they could pass them on to homeowners.

It was launched in July 2012 and has had an enormous impact with lending rocketing and rates falling to new lows.

The mortgage market is recovering and we believe it is the right time to remove this support but its impact remains to be seen in 2014.

The most likely impact is a rise in fixed rate mortgage rates from an unnaturally low level.
Some two-year fixed rates have fallen below 1.5 per cent, which is the lowest rates in the history of financial products.

Fixed rates are also linked to gilts, which are bonds sold by the UK Government to fund spending.
Gilts have been edging up slightly as confidence returns to the global economy and normality slowly seeps back.

Rising gilts is another sure-fire sign of fixed rates rising because they are directly connected. Swap rates, another key test of fixed rate prices, have also begun to rise.

Behind all these complex market instruments is one key fact: rates are beginning to edge up in 2014.

Bank of England

The saving grace is that the Bank of England is keen to delay its own rate rises for as long as possible.No member of the rate setting Monetary Policy Committee has voted for a rate rise in years and it appears to be off the agenda for now.

We believe this is good news for borrowers on standard variable rates and tracker deals who can benefit from low monthly payments for even longer.We can see that interest rates are becoming more complicated in 2014 as markets move and policymakers make changes.

We are watching anything that will affect rates and can offer you tailored professional advice to get the right deal for you.

We can save you money on your biggest monthly outgoing or we can find you the right deal for you whether it’s a remortgage, interest-only or offset deal.

As interest rates begin to fluctuate it is time to seek out advice and give you mortgage a check-up.

We can make a big difference to your finances and our expert advisers are ready to help on the other end of a phone.