We’ve never actually looked at what odds you can get for the Bank of England’s Monetary Policy Committee (MPC) actually changing bank rate, but we suspect they’re not appealing. Anyway, that’s by the by.
Whilst bank rate has been held at 0.1%, the interest (yes, there is some) lies in the outlook for inflation. You’re probably aware that inflation has been on the march recently. It certainly feels, at least to us, like everything is costing more and more as the months pass by.
Earlier this month the Office for National Statistics revealed inflation had risen from 2% to 3.2% in August which was the quickest monthly growth since 1997 – back when Tony Blair came to power and the country was awash with Brit Pop. Certainly halcyon times compared to the current state of affairs.
The MPC believes that the rise in inflation is temporary, but that they do expect it to move further upwards over the coming months, peaking slightly above 4%, before returning to the expected and acceptable level of 2% in the medium term. They also offered some explanation for this rise, pinpointing the fact that inflation was too low last year, energy prices going through the proverbial roof and the general increase of global input costs.
Rising inflation is, in any normal times, a trigger for an increase in bank rate. But, as we all know, these times are anything but normal. Put simply, with the economy facing continued challenges as we begin to recover from the pandemic, and the continual uncertainty that Brexit has brought to these fair shores, ignoring inflation and keeping interest rates low was as certain as night following day. As one commentator put it rather nicely earlier today, to raise rates would have been utter madness. Quite.
Forgive us for stating the blindingly obvious, but at some point, rates are going to rise. But we believe we are dealing in years, not months. And the UK’s lender population would seem to agree. Mortgage rates continue to fall, and deals keep getting better and better. Good news for borrowers everywhere.
If you want to talk about this or anything else mortgage related, you know what to do.
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