Looking at the main market data, it is clear that mortgage lenders and regulators are taking a ‘wait and see’ stance at present.
In the last week:
- Money markets were all pretty flat
- Bank of England maintained rates at 0.1% (unanimously)
- The Bank of England & Prudential Regulatory Authority are starting a “structured engagement on the operational considerations in 2020 Q4”
- No major changes to lender criteria
- No major rate changes from lenders
Negative interest rates
The only thing of note to come from the Bank of England’s MPC Meeting (the committee that sets interest rates) was the statement that “[it] had been briefed on the Bank of England’s plans to explore how a negative bank rate could be implemented effectively, should the outlook for inflation and output warrant it at some point during this period of low equilibrium rates.”
Therefore interesting to note that inflation has fallen to 0.2%. I wouldn’t read too much into the low inflation rate as that could be as parts of the economy like Entertainment, The Arts, Hospitality etc simply aren’t functioning at present. Of the basket of 90 items that the Bank of England tracks in order to gauge inflation, a number of items could not be rated due to the information simply not being available.
So putting one and one together and getting negative rates is probably a leap too far at present. The hope remains that as the economy starts to re-open (today’s announcement and regional lockdowns not withstanding), inflation will start to normalize and move the debate away from negative rates as that poses all sorts of practical and existential issues! But that does show you direction of travel and one we are keeping a very close eye on as interest rates, especially on mortgages, are set to stay very low, for a long time indeed, and mortgage lenders are cautious.
As stated above, pretty steady week last week.
Whoever can accurately call the next year or two requires a Nostradamus level of foresight… so for what it is worth, we still feel keeping to short term or even penalty free products may play out best for you in the long term
In the last week:
3 Month Sterling Libor = down by 0.006% at 0.053%
2 Year SWAP = up by 0.014% to 0.081%
5 Year SWAP = up by 0.005% to 0.199%