Uncertainty continues
With inflation again at zero and the price of oil continuing to fall, several respected economists add further layers to the debate regarding a potential rate rise. Concerns are high that an increase could in fact delay economic recovery. Homeowners continue to take advantage of low rates, however, uncertainty doesn’t help with future financial planning.
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Could a rate rise hinder economic recovery?
The UK economy is still in recovery and whilst progressing, it is not on dry land just yet.
Inflation hit zero again in August 2015, according to Office of National Statistics (ONS). Therefore, keeping rates low to increase disposable income and boost customer spending, could be a higher priority for the UK to help meet inflation targets.
Global factors come into play too. China’s stock market crash, oil prices falling worldwide, and the US deciding to retain their 0.25% base rate, all play a part in UK economics.
Is a further cut in interest rates possible?
Bank of England’s chief economist, Andrew Haldane threw an unexpected announcement in the mix when he suggested instead of a rate rise, which is the general consensus amongst most UK economists, there could be a further cut!
The odds are still favouring a rise in 2016, but this just shows that anything could happen and uncertainty continues.
Could February be the month?
On the other hand, Howard Archer, Chief Economist at IHS Economics, believes rates will go up one notch to 0.75% in February 2016.
Wage growth plays a key part in the decision, as recent figures show this has increased at the fastest rate since the economic crash.
“How earnings develop over the coming months will play a crucial role in just when the Bank of England starts to raise interest rates.” Howard Archer
He continued that should wage growth continue, a rate-rise decision by the Monetary Policy Committee (MPC) becomes more likely.
A difference of opinions from the top
With a differing views from two top economists, it is easy to see why the path is still not clear.
Before the start of 2016, the MPC have three more scheduled meetings. Will global economies make significant changes in this timeframe? Will the position with UK inflation be largely different to now?
Reaching a clear decision is tough in light of wider uncertainties.
Planning ahead for your financial future
It’s therefore a difficult time for consumers to carry out serious financial planning. Doctors and dentists that have secured a low mortgage rate on a fixed term will have some reassurance that their monthly payments will remain affordable.
Those that haven’t remortgaged yet, or those whose mortgage applications were rejected, will likely find planning ahead difficult.
Then there are savers, who would welcome a rate rise to give their investment income a boost.
At times like this a professional financial adviser can help by looking at all your options.
Dental & Medical Financial Services track global economic news so we can give our clients the best advice. For help with remortgaging or financial planning contact our experienced team to discuss your requirements.
Tel: 01403 780 770