10.05.10 by Andrew Montlake
Bank Base Rate Held
I know it’s a Monday which is unusual for a Base Rate Announcement, but this was wisely delayed due to something else happening last Thursday.
With the drama of an indecisive election there was never any real doubt that rates would remain unchanged for now, but there are some interesting and as ever contrasting, view-points emerging due to the current issues of the day.
The Hung Parliament on its own should not be too much of an issue, despite the histrionic scare-mongering by those with a political interest. On the face of it, the city reacts very quickly to news such as this and the hung parliament scenario has been expected for many weeks now, so much of the initial “costs” as far as interest rates are concerned have already been price in.
Bond yields may be a little volatile in the short-term, but this has all been expected and they should settle down quickly. Looking at bond yield movements over the past few days an initial jump has already been “calmed” by the rhetoric of Messrs. Clegg and Cameron over some kind of working relationship.
In the grand scheme of things, however, a hung parliament in little ol’ Blighty pails into insignificance given the issues in the Eurozone with Greece and potentially Spain, Italy and Portugal. One interesting point is that actually the Euro problems are working in the UK’s favour!
For all our issues we are not Greece. The UK is traditionally stable with a long record of meeting all our payments, so even with a Hung Parliament those who need to invest in European bonds, who do not want to take a risk on a Euro denominated region are therefore looking at the UK as a potential safer haven. This can actually counteract our own issues and have a stabilising effect.
Of course this could all change again if no political deal is forthcoming and the Euro issues are calmed on the back of the latest bail-out deal being discussed.
Whilst calm at present the markets will not wait around forever and there are some real fears over shorter-term interest rate rises if we do not see a stable Government setting about cutting the deficit.
Monty’s Mortgage Blog
11.01.12
2012: What does the future hold for the mortgage market?
In my mind 2012 was always meant to be the year when everything began to improve, after all we have the Olympics and the feel good factor from that together with a good Euro Championships would surely propel us on to bigger and better things?
Coreco
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