Aldermore Commercial Market Report: Putting the pieces together
By AdminOnce upon a time, I suspect, the minutes of the Bank of England's monthly Monetary Policy Committee meeting would have only been the preserve for economists and economics reporters.
Once upon a time, I suspect, the minutes of the Bank of England’s monthly Monetary Policy Committee meeting would have only been the preserve for economists and economics reporters. Yet since March 2009, the date when the MPC moved base rates to 0.5 per cent and where they have remained ever since, it seems the entire UK political, banking and business world has got one eye on the Old Lady.
Last week two of its members, Martin Weale and Ian McCafferty, voted in favour of a 0.25 point hike in rates for the third month in a row, while the seven other members remained robust in maintaining the rate at 0.5 per cent. Yet you only have to go back a few months to when commentators pointed out that we were all set for a rate rise in early 2015, now we’re being told it could be later in the year, or possibly in 2016. So where does this leave our industry and are there any clues to what will happen next?
There are several external factors that may be influencing these decisions. Firstly, a slowdown in the Chinese economy could see growth stumble to a lower level at 7.4 per cent in 2014, aggregated with the on-going malaise in the Eurozone and now the US Federal Reserve’s decision to end quantitative easing. At home, UK GDP may be healthy, but within the housing market we are now seeing the aftereffects of the Scottish Independence Referendum and MMR, culminating in a slowdown in the London market. Is this why the majority of the MPC have taken their finger off the rate-increase trigger?
Well, I’d firstly say I hope not. Although one could argue the UK economy relies heavily on the housing market and the accrued stamp duty it brings into the Treasury, I suspect the delay does not rely on new data pointing to a slowdown in the capital. The picture is healthy elsewhere in the UK. In fact, as the CML’s latest data says, gross mortgage lending for the third quarter 2014 was therefore an estimated £55.5 billion, an 8 per cent increase from the second quarter.
When it comes to returns on property, an index published by Zoopla showed that Salford in Greater Manchester is the location where property prices have risen the fastest in the first six months of 2014; 12 per cent to London’s 8 per cent. As London slows down and other areas of the country hot up, ordinary buyers and developers are looking to find a home or an opportunity elsewhere.
Ultimately there an awful lot of factors the MPC takes into consideration when making these decisions, as you’d expect, and not just the housing market. While I now don’t expect rates to be raised this side of the election, it will at least provide certainty for borrowers that could boost gross mortgage lending levels to the end of the year, though I suspect they are more likely to remain level.
By Charles Haresnape, Managing Director, Mortgages and Commercial Lending at Aldermore
Keywords: Monetary Policy Committee, Martin Weale, Ian McCafferty, Charles Haresnape, UK GDP, CML, property, Bank of England, BOE