Leader: MPC must hold firm on rate

In the run-up to the Monetary Policy Committee’s meeting last Thursday many predicted that February was the month when interest rates could finally rise after 22 months at 0.5%.

While Mortgage Strategy’s own Shadow MPC voted unanimously for a rate hold in last week’s issue the Sunday Times’ Shadow MPC actually voted five to four in favour of a rise.

It will be interesting to see how close the vote actually was when the MPC’s minutes are published but given the housing market’s position the decision to hold was certainly the right one.

The Council of Mortgage Lenders last week revealed that there had been a 24% year-on-year fall in repossessions, and a large part of the reason for this has been the fact that interest rates have been held at 0.5% for just shy of two years.

With many unable to remortgage away to cheaper deals this has been a vital breather.

At the same time we’ve had little uplift in lending. The fact mortgage lending was excluded from the infamous Project Merlin says it all about any potential government boost to lending.

And after Lord Oakeshott’s damning indictment of the deal, it’s doubtful that it would have made any material difference.

Lack of funding continues to blight the market and for all the housing minister Grant Shapps’ talk of drilling down to the reasons why first-time buyers are barred from the market, there seems little chance that this will change any time soon.

When the barriers to entry are so high any move that could increase repossessions, such as increasing the base rate, is a direct threat to the UK housing market.
So lets hope the MPC continues to mirror Mortgage Strategy’s Shadow MPC in its thinking.