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By Taj Kang

After another successful month of predictions, contractor specialist mortgage broker Contractor Mortgages Made Easy has yet again held its own version of The Bank of England’s Monetary Policy Committee.

Last month, although the committee itself was split, three members out of nine voting for a raise, every one of the mortgage advisors that took part in the Monetary Policy Committee correctly predicted that the base rate would be held at 0.5%.

This month, however, we will have the Inflation Report released which is historically when we have seen a rate rise. We have seen continued speculation that the base rate is about to be raised. So we looked again at the economy and shared our thoughts on if the base rate was going to be raised.

Taj Kang, Associate Director

PREDICTION: RATE HOLDS AT 0.5% IN APRIL

I think that the base rate will be held at 0.50% on Thursday, mainly due to some interesting words from Mervyn King (Governor of the Bank of England) regarding long term interest rates this week. High levels of debt held across European sovereign nations caused Mr King to say “The economic consequences of high-level indebtedness now would become more severe if rates were to rise,” Mr King said. “It is the main reason why interest rates are so low.” He does not see this situation changing in the short term, which is a strong hint that the base rate will be held at 0.5% this week. Andrew Sentance, a long term advocate of a base rate increase, will be part of the Monetary Policy Committee for the last time in May. This is likely to defer any increase in the rates until later this year. My prediction would be August / September for a 0.25% increase.

Andy McBride, Associate Director

PREDICTION: RATE HOLDS AT 0.5% IN APRIL

Again, I don’t see interest rates rising this month. As I stated last month, arguments to keep the rates low remain very strong. Whilst the economic recovery remains weak, it is becoming increasingly difficult to justify hiking the cost of borrowing.

It is almost impossible to predict accurately what interest rates will do and many clients I speak with have lost out financially trying to second guess the markets in the past. My advice has always been to speak with a profession mortgage adviser, who will help you pick the product that best fits your circumstances rather than chasing the best headline rate.

Rebecca Sidwell, Senior Mortgage Consultant

PREDICTION: RATE HOLDS AT 0.5% IN APRIL

My prediction for the base rate this month is that it will stay the same at 0.50%. My reasons behind this are that I feel we are still at least 3 months away from any changes, with August being the next key inflationary month.

I stand by my original reasons that if there were to be an increase in the base rate now in a slowly recovering economy, this will have a dramatic effect on the housing market, and the public’s willingness to make a commitment to obtaining a mortgage.

Susan Grant, Senior Mortgage and Protection Consultant

PREDICTION: RATE HOLDS AT 0.5% IN APRIL

I feel that the base rate will yet again remain the same this is due to the cost of living continuing to remain at its highest.

Ben Rogers, Senior Mortgage Consultant

PREDICTION: RATE HOLDS AT 0.5% IN APRIL

Again my prediction remains unchanged from the previous month and I believe that rates will again hold.

Roger Bootle, an economic adviser for Deloitte has predicted that inflation will rise past the 5% barrier by the end of the year. This coupled with pay cuts and freezes mean that household incomes in a lot of instances will actually fall this year providing another reason why interest rates should be frozen.

I believe a fully functioning economy runs with interest rates circa 5% and eventually they will return to this kind of level but as the age old saying goes “Rome wasn’t built in a day”. Any sudden significant changes can have a massive impact on another area of the economy and a rise in interest rates which will cause an increase in household outgoings will obviously have a significant impact on the economy at this stage too. So my prediction for base rate stands as it was last month at a firm hold in rates.

Steven Lambert, Senior Mortgage Consultant

PREDICTION: RATE HOLDS AT 0.5% IN APRIL

Members of the MPC can breathe more easily in light of the recent drop in inflation. The pressure to hike rates is slightly abated for a while longer.

Reno Malidis, Senior Mortgage Consultant

PREDICTION: RATE HOLDS AT 0.5% IN APRIL

Although inflation is twice the actual target I still believe the base rate will remain at 0.5%. Mainly due to the remaining weaken economy the Bank of England would be reluctant to do anything at this stage that may possibly weaken the economy further.

The Verdict

Many predicted that this month would see a rise in the base rate, inflation is still way above the government target, but this prediction has been quashed by many economists and indeed by our own select group of mortgage advisors. Many are now predicting August as the month that will see a rise.

About the Author: Article written by Taj Kang, Associate Director at Contractor Mortgages Made EasyTo contact us regarding this article e-mail: media@contractormortgagesuk.com

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