Financial Market Update
Colin Payne : 20 June 2011
The Monetary Policy Committee (MPC) has, as expected, kept interest rates at 0.5% for the 27th month in a row, citing that the inflationary factors in the market cannot be influenced and are of a temporary nature. With inflation expected to increase to over 5% in the short term the Bank will no doubt come under increasing pressure to increase interest rates during the remainder of the year, with opinion still split on when rates will increase.
Despite the apparent allure of supermarket bargains, a typical basket of fresh produce – including bread, meat and vegetables – now costs 4.9% more than it did in 2010. And it is rising at its fastest rate in almost two years. Scottish Power also signalled this week what is expected to the first in a fresh wave of domestic-energy price rises as it announced that its average gas tariff would increase by 19% from august, with electricity also up 10%.
The rate futures market is not pricing in an increase until March/April 2012 – the British Chamber of Commerce expects interest rates to start rising from August and to be at 2.75% by the end of 2012. On the other hand, the Ernst & Young Item Club still take the view that the bank rate could remain at the current 0.5% level, certainly until the end of 2011 and possibly throughout 2012 due to the overall weakness of the UK economy.
This all has led to fixed rate mortgages comind down, and competitive pricing across the entire market.
For current advice and recommendations on the best mortgage deals, contact us on 020 7317 7311
Colin Payne, Chapelgate Associates Ltd
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