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Market Watch: Base rate U-turn means we should take one month at a time


While Carney has U-turned on rate rises, the US is becoming more doveish – but we must still take one month at a time

Sharp U-turn alert and, yes, it involves the Bank of England and interest rates. After all the pontificating and predictions, Mark Carney last week suggested we could see no base rate movement until 2017. So much for the expectation a decision might come into sharper relief at the turn of the year.

Across the pond, the tone is becoming more doveish. Federal Reserve chairman Janet Yellen has a tough decision to make as she weighs up what to do versus her own credibility. If the US were to make an interest rate move, pressure would return on the UK. But with inflation set to remain negative for a while and below target for the next year or so, plus the fact global considerations seemingly hold more weight than domestic ones, it will be a case of taking each month as it comes.

Meanwhile, Halifax reports house prices rose by 9.7 per cent in the year to 31 October. With demand still so high, it is hard to see anything changing soon.

In the markets, three-month Libor is unchanged at 0.58 per cent while swap rates have teased up. Next week we will see reaction to the comments above.

2-year money is up 0.02 at 1.02%

3-year money is up 0.03 at 1.22%

5-year money is up 0.02 at 1.53%

10-year money is up 0.02 at 1.95%

In the product world, TSB has its lowest fixed rate for six months, with its two-year fix decreasing to 1.44 per cent at 60 per cent LTV.

Santander has a swathe of first-time buyer exclusives starting at 1.49 per cent for a two-year fix at 60 per cent LTV. At 85 per cent LTV the rate is 1.99 per cent with a £995 fee and at 90 per cent LTV borrowers can get 3.04 per cent with no fees. The lender has also cut its 95 per cent LTV rates to 3.99 per cent for a two-year fix and 4.74 per cent for a five-year fix with no fees.

Elsewhere, Coventry has new Flexx rates with a two-year tracker at 1.59 per cent to 65 per cent LTV, a two-year fix at 2.39 per cent to 75 per cent LTV and a five-year fix at 90 per cent LTV priced at 3.85 per cent, all with no penalties.

Leeds BS has also tweaked some rates down: its five-year fix at 65 per cent LTV is now 2.34 per cent with a £1,999 fee. At 75 per cent LTV, the rate is 2.49 per cent.

Teachers BS has increased its full interest-only offering to 60 per cent LTV, allowing part-and-part to 75 per cent LTV. I expect further movement from lenders on interest-only in the near future.

Nottingham BS has raised its LTI cap to 4.5 times up to 80 per cent LTV while Newcastle has increased the minimum LTV from 50 per cent to 75 per cent for lending against ex-local authority flats.

In buy-to-let, Woolwich has changed its criteria and will allow no more than £4.5m aggregate borrowing across all lenders, as well as no more than six properties at point of completion.






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