Interest Rates Held

Interest rates held at 0.5%, but pound spikes on rate rise expectations

June 27th, 2018

Whilst interest rates were held at 0.5% at this month’s Bank of England Monetary Policy Committee meeting, a voting pattern change was enough to spike the pound, on speculation that interest rates will rise in either July or August.

Headlines

  • Interest rates held at 0.5%
  • Last rate rise was November 2017 from 0.25%
  • Monetary Policy Committee votes 6-3 Against a rate rise, up from 7-2 vote Against in May 2018
  • Investors now believe there is a 68% chance of rate rise in August

Analysis

Interest rate speculation has been considerable throughout 2018, after November 2017’s interest rate rise from the historical low of 0.25% to 0.5%, where it has remained since. The simple action of one Monetary Policy Committee member voting for a rate rise in June 2018, rather than against a rate rise – as they had a month earlier – was enough to strengthen the pound against the dollar, as investors speculate that a rate rise by August is now expected.

The signs in the economy this year have been mixed, with economic output lower than expected earlier in the year, but recent borrowing figures from the government suggest that the overall picture is relatively healthy, particularly as unemployment figures have remained low.

Commentary

Managing Director, Hiten Ganatra commented: “The signs are growing stronger that a rate rise is imminent, in spite of some market turbulence and the unknown implications of Brexit.”

Hiten continued: “We are expecting a flurry of Remortgage activity over the next couple of months as homeowners look to secure fixed-rate deals before the interest rate hike.”

If you would like to discuss any aspect of remortgaging, contact the team on 01908 465100.