During several appearances in July, Bank of England Governor, Mark Carney, hinted that the first interest rate increase in more than 7 years could come around the end of 2015. A United Trust Bank survey asked brokers if they felt whether Mr Carney’s comments had any effect on new business levels.
Although the majority of brokers saw no change, 25% felt that they had received more new business enquiries whilst 13% felt they’d received fewer.
The survey also asked brokers for their views on when the first increase to the Bank of England base interest rate was most likely to come and 38% indicated the first quarter of 2016 and 33% the second quarter. Just 7% felt that rates would remain static until 2017 or later.
Harley Kagan, Managing Director of United Trust Bank, said:
“At the start of the summer it very much appeared that the BoE was laying the groundwork for increasing the base rate to 0.75% by the year end. However, since then we’ve had an economic slow-down in China, falling oil prices, a correction of our own stock market, and generally weak global growth. With the US Federal Reserve delaying a forecast start to increasing US interest rates, many commentators have put back their predictions for a first increase to around the middle of 2016 rather than the start. Around a quarter of the brokers in our survey believe the first rise will come in the second half of 2016 or later. Indeed, Bank of England chief economist Andrew Haldane posited that the next move might need to be a cut rather than an increase, although he is the only MPC member to have publicly suggested that a decrease might be in order.
“Although savers will be looking forward to getting a better return on their nest eggs, borrowers have enjoyed this period of low interest rates and many have taken the opportunity to invest in their homes and businesses. I’m confident that when interest rates do eventually start to rise the increases will be small and gradual, and I’m not surprised that many brokers saw an uplift in enquiries once it looked like Mr Carney had made his mind up.”
