At the June 2018 meeting of the Monetary Policy Committee, the Bank of England decided to keep interest rates at 0.5%. This was a majority decision with six committee members voting to keep the rate the same, and three wanting to increase it. Andrew Haldane, the bank’s chief economist was one of those voting to raise rates to 0.75%. This is the first time he has voted against the majority.
There are signs that the UK economy is becoming healthier. GDP has grown by 0.1% in the first quarter of 2018 and inflation is continuing to fall. Government borrowing figures published in June 2018 are encouraging. Unemployment is the lowest it has been in 40 years. All these indicators contribute to an optimistic feeling about the future of the economy, despite uncertainty due to not knowing the effect that Brexit will have on it.
The Bank of England has signposted that it will raise rates soon. This has led financial experts like James Smith of ING to predict that rates will rise to 0.75% in August. He commented:
“While the Bank hasn’t offered any firm signals or commitments … the overall outlook and tone suggests they’d still like to raise rates (if) the data allows.”
The decision by the Bank of England to keep interest rates the same should mean that commercial mortgage and residential mortgage lenders would not increase their rates. Bridging finance organisations are also unlikely to increases their rates.