For the first time in 10 years, Mark Carney and his ‘merry men’ at the Bank of England have decided to put Interest Rates up to ½%, which is where they were before the Referendum last year.
If you remember, they dropped the rates when the unexpected Brexit result was known, in order to stabilise the markets and also promised to support the Pound where necessary.
Currency speculators have already taken this rise into account and therefore, I don’t think the Pound, against the Dollar or Euro, will change a great deal, unless the rates are ‘cranked’ upwards again during the course of next year.
Although the figures are small at these levels, it is after all, a doubling of the rates and perhaps, more telling, the start of an upward trend to keep the money supply and inflation in order and certainly, the end of the stimulus to the Economy which Quantitative Easing to date, has represented.
We now begin a new era where control of inflation is more important than growth and where the Economy is almost at capacity in terms of employment.
Frankly, my own opinion is that with the Pound gently rising from the low ebb of last year, the inflationary effects of expensive imports will start to ease and given that the underlying Economy is slowing in any event, I wouldn’t have thought that inflation in the middle to long term, would be the biggest problem.
There is still uncertainty in the air with Brexit and this will probably be the case until a deal is done, in all probability by October 2018, when the true picture of our trading arrangements with the EU, will become clearer.
I am sure that lenders in the Residential Property market will probably ‘crank’ the mortgage rates up by a ¼%, but I don’t think it will be appreciably more than this for the moment. The point being, that the trend for property owners who borrow is, technically, going the wrong way, although I think it will be a very flat curve and therefore, not too much to worry about.
There is ‘much ado’ about Stamp Duty rates dropping for first time buyers in the Chancellors Budget this month, to help repair the ‘broken housing market’. I dearly hope, that this will not be funded by any increases in the higher rates of SDLT, since this would be disastrous for the Property Market. The former esteemed Chancellor, Osborne, played fast and loose with Stamp Duty rates in 2014 and this has had a very profound affect on the market place and levels of activity generally in London, where prices are down, in some cases, by 25%.
The only winners in this game are the savers, who will be slightly better off, and perhaps the Banks will be slightly less conceited about the ridiculous notion of charging customers money to keep their cash?
What the government cannot easily ignore, is that the Property Market is such an important stimulus to retail spending and the UK Economy generally. It is more than a coincidence that with the drop in activity of the former, retail spending has been muted of late, which is not good news for UK growth, particularly when trying to recover from any uncertainty from Brexit.
Instead of this obscene spectacle, if not circus, between Barnier and Davis, played out in front of the ‘baying’ European news media, why oh why, don’t they lock themselves away, perhaps for months at a time behind closed doors, and negotiate Britain’s trade deal with the EU, instead of this meaningless charade where the ‘court jesters’ are sent out to amuse the audience? This after all, is meant to be a serious business where people’s lives and livelihoods are at stake and how much more serious a matter could this be, for governments to deal with?
Yes, you would sell less newspapers and the TV media would have to find something else to speak about, but the important job of negotiating would be done far more efficiently, with much less theatre, which most serious politicians, would far prefer.