Nearly two-thirds of mortgage professionals expect the Bank of England to increase base rate in the first half of next year.
A poll of 475 readers by Mortgage Strategy shows that 36 per cent of the industry expects the Monetary Policy Committee to increase the benchmark rate in the second quarter of 2016. Q1 2016 was the second most popular option, at 28.2 per cent, followed by Q3 at 10.7 per cent and Q4 or later at 16.4 per cent. Around 8.6 per cent of the industry expects rates to rise this year.
Brokers believe falling oil prices and slowing wage growth mean that the Bank will not be able to increase rates until spring next year at the earliest.
Deflation has been predicted to return as a result of falling oil prices and wage growth has slowed to 2.4 per cent year-on-year, figures from the Office for National Statistics show.
John Charcol senior technical manager Ray Boulger says: “If I had to name a quarter, I would probably say Q2 next year, but I think if that is wrong it will be later, not earlier.
“The key factors are that the inflation rate is going to remain low for quite some time and I think with oil prices close to lows hit earlier this year – as well as other commodity prices – that will keep inflation down. The Chinese devaluation will tend to import deflation into the UK because, clearly, we import a lot of manufactured stuff from China.
“So I think all the indications are now that we will see inflation remain close to zero for rather longer than it looked like earlier this year. It is really hard to see how the Bank of England can think about putting base rate up when inflation is still around zero.”
Mortgages for Business managing director David Whittaker says: “Up until a couple of weeks ago, I might have been one of the hawks who would have gone for a November rise because that is when the next inflation report is published. I am now going to go for February because they will not go for January as people’s credit cards are maxed out.
“But given the massive deflationary effect of the collapse of the oil price, any hawkish thoughts have got to go away.
“However, I am still convinced that there is real wage growth and, while productivity remains a point of concern, I think there will be those on the MPC who say it is far better to do something small sooner, rather than have to do large chunks later.”
BoE governor Mark Carney last month said the MPC could consider raising rates at the “turn of the year”, although this does not mean rates will rise then.
Minutes from this month’s MPC meeting show that Ian McCafferty was the only member to vote for an increase in base rate, to 0.75 per cent.