Investors will be looking on very carefully at the moment, after recently-revealed minutes from the Bank of England’s August Monetary Policy Committee have shown that some of its members were split regarding a proposed rise in interest rates. Following the rate review, the value of the UK pound bounced back from a four-month low.
Dissension in the Ranks
In a worldwide press release, the BoE’s Monetary Policy Committee explained that two of its nine members – Martin Weale and Ian McCafferty in fact voted to increase the base rate from a fire year historic low of 0.5%, all the way to 0.75%. Mr Weale and Mr McCafferty have both suggested that current economic circumstances should justify an immediate increase, something that will impact directly on the rates for home loans and savings. They went on to explain that, amongst other elements, the steady fall of unemployment in the UK should create an economic environment in which, overall wages throughout the nation will rise. They further argued that, since financial policy generally operates with a lag, it was sensible to raise the bank rate in anticipation of labour market pressures.
Current Rates Maintained
Despite pleading from Mr Weale and Mr McCafferty, the Bank of England governor Marc Carney, as well as BoE members Jon Cunliffe, Ben Broadbent, Nemat Shafik, Kristin Forbes, David Miles and Andrew Haldane all supported the proposition to maintain the current rate of 0.5%. Following the release of the minutes, the Euro fell to 0.7996 from 0.8014 against the pound, with the pound rising to 172.25 against the Japanese Yen. However, given the apparently dovish nature of the meeting, it seems as if the rally in sterling is unlikely to continue in the near future.
Mortgage Lending Increases
Meanwhile, the CML (Council of Mortgage Lenders) also revealed the latest loan figures, which seems to compliment the decision finally made by the MPC. It is estimated that gross mortgage lending reached as much as £19.1bn in July of this year, a full 7% higher than the figure of £17.9 billion estimated for the June period. What’s more, the July estimate remains a full 15% higher than July of 2013, which sat at £16.7 billion. All in all, these figures represent the highest since August of 2008, when the total value soared to £19.3 billion. Whether any distinct trend can be pinpointed at present is uncertain. What is certain though, is that investors will be following this situation with bated breath.