Mortgages: What Do The Election And Base Rate Have In Store
09 April 2010 / by Rachael Stiles
The Bank of England once again voted to keep the base rate at 0.5 per cent this week, which will please borrowers, and the Monetary Policy Committee’s monthly decision could soon be influenced by a different Government, which could have a significant impact upon fiscal policy and mortgage lending.
This is the opinion of John Boulger, spokesperson for mortgage adviser John Charcol, who believes that in light of the “significant difference in the fiscal policies of the two main parties, and the impact these are likely to have on the markets, the future trend of bank rate is very entwined with the political future of the UK.”
The Bank of England announced today that the base rate will remain at 0.5 per cent, as it has been since March 2009, and that funding for its asset purchase programme will remain at £200billion.
The upcoming General Election, scheduled for 6 May, will have “a rather more important influence next month”, says Mr Boulger. “Should the election be close the result may not be obvious when the MPC starts its two day meeting on the day after the election.”
“Looking further ahead the MPC will clearly want to see more information quickly from the new government on its fiscal plans as monetary policy is clearly influenced by fiscal policy. For example, the Conservatives have said that if they form the new Government there will be a budget within 50 days. They have also said they want to see interest rates remain low for some time.”
Anyone who is thinking of taking out a mortgage before the election “should not ignore the political risk”, Mr Boulger warns – partly because of the impact the result could have on interest rates, but also because of the effect it will have on the UK economy.
As interest rates have gradually fallen in the last month, with Woolwich mortgages cutting its rates, among others, and both fixed rate and tracker mortgage rates have been falling.
“Obtaining independent mortgage advice on one’s own specific situation should continue to be a priority for borrowers,” he said, adding that this is especially true amid an increasing number of factors to consider, such as the suspension of stamp duty on first time buyer properties worth up to £250,000.
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