Market Watch: Carney is covering all the bases

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Carney has upgraded his growth forecast and reversed his jobs outlook but has ‘ballooning’ household debt in his sights

I am not sure I can bring myself to speak too much more about the new US president without going off on a 10,000-word rant, so I will merely give him a passing mention.

All the furore aside, the early surge of business confidence the new administration has given seems to be catching. Trump will no doubt do something crazy in due course to change that, however, so we should enjoy it while it lasts.

In the UK, our beloved Bank of England governor, Mark Carney, has given his latest view on interest rates, which covers both bases: they may go up, they may go down. He has, however, upgraded the growth forecast substantially from 1.4 per cent to 2 per cent.

Another embarrassment after the pre-Brexit warnings. There is a rumour Paul the World Cup Octopus will be making future predictions.

The Bank has also reversed its jobs forecast, predicting unemployment will be around 250,000 lower than first thought. The UK is certainly proving resilient but, as we have said before, it could be a matter of timing. We need to keep this air of positivity going and talk ourselves into sustainable, long-term growth.

That said, in the face of rising inflation the markets are expecting interest rates to increase to 0.75 per cent by 2020. It does seem the Bank acted prematurely in cutting rates when it did and there are many who believe a reversal should happen soon.

It also has “ballooning levels” of household debt in its sights, and is looking into lenders’ behaviour around how easy additional consumer credit is. Should personal loans and credit card limits be subject to the same affordability calculations as mortgages?

In the markets, meanwhile, three-month Libor is still at 0.36 per cent while swap rates have increased once more.

2-year money is up 0.03% at 0.71%
3-year money is up 0.04% at 0.83%
5-year money is up 0.05% at 1.05%
10-year money is up 0.04% at 1.46%

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Accord has cut residential products and introduced no fewer than five new offset products. But it is removing the £1,000 incentive. It also has a five-year fixed priced at 2.76 per cent up to 90 per cent loan-to-value with a £995 fee.

Elsewhere, Newcastle Building Society has enhanced its range for the recently self-employed, with two-year fixes from 2.1 per cent with free valuations up to £500,000.

Halifax has introduced three new product transfer rates available between 85 per cent and 95 per cent LTV, starting at 3.19 per cent with a £999 fee for a two-year fix. It has also changed policy on product transfers where interest-only is concerned and no longer insists on transferring some of the loan onto repayment. It will still advise that this may be possible, however.

Meanwhile, Leeds Building Society has reduced its 95 per cent LTV two-year fixed to 3.69 per cent with a £1,999 product fee.

There are some good moves in the buy-to-let specialist world as Kent Reliance slashes its rates available for landlords looking in both personal and limited company names. It now has five-year fixes available from 3.59 per cent at 65 per cent LTV with 2 per cent arrangement fees, moving to 4.99 per cent at 85 per cent LTV.

Furness Building Society has launched new products, including a family buy-to-let product priced at 3.75 per cent and a standard buy-to-let product at 3.2 per cent. Both are up to 75 per cent LTV with a fee of £1,495.

The Post Office has launched some buy-to-let products for small-portfolio landlords, with rates starting at 1.93 per cent fixed for two years with a £995 fee. It also has a three-year fix at 2.28 per cent to 60 per cent LTV.

Finally, the Mansfield is launching Versatility: the brand name given to its specialist lending products catering for the self-employed, family assist, lending into retirement and family buy-to-let mortgages. More competition in this sector is most welcome.

Heroes

Andrew Montlake is director at Coreco