With the next Monetary Policy Committee scheduled for August 1st, mortgage borrowers and businesses will inevitably be pinning their hopes on a long-overdue reduction on the 5.25% base rate (a 16 year high for interest rates.)
If this does come to fruition, it will be the first reduction in borrowing costs that the UK has seen in over four years, and will help to bring about lower mortgage rates, as well as providing a welcome boost to businesses and job opportunities.
The outcome depends, of course, on whether inflation stays down at its 2% target in the period leading up to August 1st, and this is something that is open to some debate.
According to experts, there is likely to be some movement here, and the MPC will be monitoring this closely, along with the CPI (Consumer Price Index) data, wage growth and ‘core inflation’ when making their decision.
Wage growth, currently, is proving strong, and in addition to this, prices in the services sector continue to rise, which might lead to greater caution being exercised on August 1st.
That said, due to the lag which monetary policy works by, a base rate cut is certainly not beyond the realms of possibility, and indeed it would feed nicely into Labour’s legislative agenda, which niches down on promoting economic growth.
According to the King’s Speech earlier this month, the new government plan on doing this, in part, by enforcing mandatory housing targets for councils, and by encouraging the property sector to build. They’ll also be investing in infrastructure, all under the ethos of ‘Get Britain Building.’ This new house building plan (which constitutes a target of 1.5 million properties in the next five years) is likely to be in place by the Autumn.
As we head into the second half of the year, these promises (together with the element of political certainty offered by a new Government) are likely to help buoy home-mover confidence, meaning that the medium to longer-term outlook for the property market is, as it stands, refreshingly positive, and especially against the backdrop of the last few challenging years.