John Philips, group operations director at Just Mortgages and Spicerhaart, said the forecast return to target inflation of 2% makes interest rate hikes less likely.
Philips said: “The chancellor announced that inflation is predicted to return to its 2% target over the next 12 months, which suggests that the speculation over further rate rises may be just that.”
“The reason for the recent rise was to curb inflation, but if it is due to fall back naturally over the coming months, these rate rises may not happen, meaning borrowing conditions will remain favourably low,” he added.
Elbow room
However, Hargreaves Lansdown senior analyst, Laith Khalaf argued that a rate hike is still probable, and that the Bank of England (BoE) will likely be waiting for more data in the coming months to support interest rate rises.
“The problem with economic forecasts is that they just get revised all the time,” said Khalaf.
He continued: “It may be that the OBR forecasts are borne out, and indeed the BoE believs that inflation is going to moderate and that wages are going to pick up.
“But so far in the actual data, we haven’t seen too much evidence of that happening.”
Khalaf added that aside from inflation, the BoE will also be thinking about raising rates to create room to maneuver.
“At the moment they don’t have that much elbow room. They will probably like a bit more room to cut interest rates by the time we get into the next slowdown,” said Khalaf.
“I think the market is penciling one in May, or maybe a bit later. But it’s a fair assumption that we’ll get at least one this year,” he added.
Keeping promises
Richard Pike, sales and marketing director at Phoebus Software, said the government appears to be keeping its promise in prioritising housing.
“Bearing in mind that it is only four months since the investment of £44bn to raise housing supply was announced, it appears the government is indeed holding to its promise of making housing a priority.”
Though Pike added that the lightly-packed statement left much to be desired.
Pike continued: “The Housing Growth Partnership budget has increased, which means more support for small housebuilders. This is a vital element in getting the housing we need built, in the areas where people want to live.
“However, the question is how that money finds its way to the developers and how they can combine it effectively with other funding to get each project underway and finished.
“The most frustrating thing for many, following today’s speech, is that we will have to wait until the budget in November to find out how the government intends to tackle the gap from planning permission to build completion. This issue is one that really needs to be undertaken sooner rather than later so that land banking becomes a thing of the past.”
Wait and see
Jonathan Sealey, chief executive officer at Hope Capital, said the focus on small housebuilders could give housing supply the boost it needs.
Referring to the £220m Housing Growth Partnership for small housebuilders, he noted any measure that increased positive sentiment among builders and developers and got them building was a positive move.
While the reiteration of support for supply is welcomed, Sealey cautioned that action is still needed to follow through on promises.
He continued: “The other positive for the housing industry was the commitment by the chancellor to spend £44bn over the next five years to increase housing supply by 300,000 a year by the mid-2020s, as pledged last Autumn.
“What we need to see now is if this pledge is actually followed by action and the housing numbers do indeed increase. The funding is there, and planning permission is being given, but this needs to turn into action on the ground.”
No news is good news
Lendinvest’s chief commercial officer, Mike Tooth argued that the lack of major announcements gives the industry time to digest recent regulatory shifts.
“The absence of a major policy shakeup in the chancellor’s statement today is precisely what the industry needed,” said Tooth.
He continued: “Rather than wasting time adapting to the step changes we’ve become used to seeing, lenders and developers alike can get on with what they do best, getting more homes built across the UK.
“This is a clear opportunity for industry and government to get the funding mechanisms that are already in place – such as the Home Building Fund and British Business Bank, working harder to increase the supply of much needed capital to SME homebuilders around the country.”
For more on the Spring Statement, see a summary of the highlights of the chancellor’s speech, the accompanying OBR figures, and the impact of stamp duty relief on first-time buyers.
