The Bank of England (BoE) suggested rates are unlikely to rise before Q3 2016 in its confirmation of a set of guidance surrounding interest movements.
Jonathan Harris, director of mortgage broker Anderson Harris (pictured) said this offers more official rate certainty than the country has ever had and could spark a rate war among mortgage lenders.
“While the Bank is not promising to keep interest rates low for a particular period of time, it expects that rates will not rise above their current level of 0.5% before Q3 2016,” he said.
“We expect fixed-rate mortgages to fall even further on the back of this announcement. They may already be at historic lows but if lenders are to convince borrowers to opt for a fix when interest rates are highly unlikely to rise, then pricing needs to be attractive,” he said.
Peter Rollings, CEO of estate agent Marsh & Parsons also highlighted the significance of the certainty the BoE has offered today.
“This is a highly important statement which will allow lenders to offer attractive fixed rate deals to potential buyers and will surely lead to greater demand and activity in both the resale market and provide a fillip for first time buyers.”
Rollings said the Governor is implicitly saying interest rates will not rise until 750,000 more people are in work. This will give the market across the UK much welcome stability.”
The central bank revealed an ‘explicit’ guidance framework outlining conditions which must be met before interest rates can be raised or cut by the Monetary Policy Committee (MPC) today.
In its quarterly inflation report, the Bank unveiled plans to tie interest rates to the unemployment rate, but added its new ‘forward guidance’ to the market is not unconditional.
The 7% mark represents the point at which the BoE will “reassess” its interest rate policy, governor Mark Carney said this morning. UK unemployment currently rests at 7.8%.
