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INTEREST RATE RISE: NOT IF BUT WHEN

There seems to be increasing pressure for an interest rate rise but some important factors mean the inevitable may be postponed for a while yet. Ever since interest rates hit their all time low there have been discussions about when interest rates will rise. This is not surprising it is a powerful macro economic tool but it also directly affects everybody; whether a saver or a borrower, and the knock on effect on the housing market is obvious to see.

Our house view would be that interest rates will either rise in March 2015 or June 2015. Very precise dates, but both bridging the General Election in May 2015.

The International Monetary Fund (IMF) seems particularly concerned about a new property bubble developing, and concerned over the effectiveness of mortgage lending rules implemented recently from the Bank. We have mentioned before and continue to reiterate that the London market is very different to the market in much the rest of the UK. We operate principally in the East Midlands and as far as we are aware there is no property bubble, indeed prices in absolute terms are still below 2007 levels in many areas, and in real terms (taking into account inflation) they are considerably below. There is NO bubble in the property market outside the M25.  We would agree levels of household debt are high, but that is the consequence of easy money, or QE, and hardly new news.

So the Bank of England, have the unenviable task of timing the next rise; to ensure no bubble emerges, but making very sure that any interest rate rise does not slow economic growth.
The Bank have a 9 strong committee who vote on such issues; at present 2/9ths are in favour of a rate rise. Important criteria to watch are house prices, inflation rates, unemployment rates and wage levels.

We are not economists but we think the above dates are good guesstimates, and we would feel confident that when rates do rise they will be slow and gradual; nothing startling, nothing untoward. After all, we have been warned about a potential rate rise for a long time now!

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Osprey Property

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