As we wave goodbye to Summer, the inevitable changes get closer. Not the shorter days and the colder climate but interest rate rises. Like the changing of the seasons, it is merely a matter of when this is going to happen.
Last month, I forecast that this is likely to take place in the first quarter of 2015. Has anything happened to change my opinion?
House prices continued to rise in August - up by 0.8% which is the 16th successive monthly rise. According to the Nationwide house price index, the annual increase is now 11%. This is lower than in most previous months and so is a sign that the housing market is not overheating. Therefore interest rates do not need to rise to cool this down as nationally housing affordability is not stretched (by historic standards) due to the low level of mortgage rates.
Two of the Bank of England's Monetary Policy Committee again voted to increase the Base Rate in September. They were obviously outvoted by the other 7 members and so rates stayed the same but this shows that there is a willingness to consider rate rises now. This temptation to increase rates will only get stronger in the coming months.
Barclays have published what they consider to be a "consensus" of opinion from industry professionals on what will happen to interest rates over the next year.
The average Base Rate prediction for Q4 in 2014 was 0.61%. This means that some insiders believe rates will rise before the end of the year.
The average Base Rate forecast for quarter 4 in 2015 was 1.39% with a lowest of 0.8% and a highest of 2.33%. From this it is safe to say that the groundswell of opinion is that interest rates will rise by 1% next year.
Do any of these stats indicate that a rate rise may be sooner than next year? The answer is "NO" - not yet anyway. So my prediction remains the same: enjoy Christmas but then brace yourself for higher mortgage payments.
If you are on a variable rate or tracker, it may be worth fixing before rates start going up so feel free to call me on 0844 736 1920 or email firstname.lastname@example.org to discuss this further.