Interest rates held: comment

by | Nov 1, 2018

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Kevin Roberts, Director, Legal & General Mortgage Club:

“A hold in the base rate is no doubt welcome news for borrowers. Mortgage rates continue to remain at near-record lows and there is also a growing number of innovative solutions for first-time buyers and retirees alike available on the market.

“It’s still a good time to lock into a fixed rate, and for any borrowers coming to the end of their term who are worried about the effects of a further rate rise, speaking with a financial adviser is a prudent first step.”


Alistair Wilson, Zurich’s Head of Retail Platform Strategy:  “It would have been a surprise for the Bank of England to raise rates so soon after the Chancellor’s spending spree on Monday. Inflation also fell lower than expected at the last count, and wages have risen at the fastest pace in nearly a decade, easing pressure to raise rates in the immediate future.  But with interest rates remaining low, and the Budget failing to provide any support for struggling savers, consumers need to consider options where they could enjoy better returns. Putting small amounts into a stocks and shares ISA or pension fund are practical ways to build a healthy sum over the years and mitigate the impact of a rise in the cost of living.”


Simon Longfellow, Head of stepstoinvesting.com: “As interest rates remain unchanged at 0.75%, consumers will continue to make feeble returns from their savings. While new entrants to the Banking market, like Marcus, attempt to woo new customers with an introductory rate of 1.5%, the reality is that the real return still lags way behind inflation.

“Struggling savers should therefore explore options for returns elsewhere. With the combination of low rates and high inflation, UK savers saw the purchasing power of their money fall by £30.3bn last year, the equivalent to £1,147 per household.  An alternative to consider would be investing, with more education around the benefits and risk involved, consumers will be more aware of higher yielding alternatives.”


Dilpreet Bhagrath, Mortgage Expert at Trussle:  “Avoiding another rate rise is undoubtedly good news for home owners on variable rate mortgage deals, who’ll have only seen their annual payments gradually increase since rates began rising last October.

“We’re still in a period of very low mortgage rates historically, so borrowers should check whether they could save money by switching to one of the more competitive deals on the market. Those eligible may also want to consider making overpayments on their current deal to increase equity in their home and bring down their debt. This will be more difficult to do if interest rates rise higher in the next year or so.”


James Klempster, Head of Investment Management, Momentum UK:

 We’re being told that the era of low interest rates is finally coming to an end, but in reality, the Bank of England will be extremely reluctant to squeeze an economy already struggling to grow in the lead up to Brexit.

“It will be a long time before interest rates exceed inflation and until this happens, people with cash in savings accounts will continue to lose money in real terms and effectively become poorer.

“The way to beat this trap is by making your money work for you through investments. There is a misperception that investing is highly complicated and risky, but in its simplest form, it’s about setting clear life goals, targeting investment outcomes that satisfy these goals and ensuring that your money can grow at the right pace to meet them.”


Laith Khalaf, Senior Analyst, Hargreaves Lansdown:

“The Bank of England has left interest rates on hold, surprising precisely no-one.

“A fragile UK economy, softening global demand, and the looming shadow of Brexit leaves little scope for the central bank to do anything more than sit on its hands for the time being.

“Markets are now pricing in a rate rise in the middle of next year, though between now and then we should get greater clarity on the size and shape of Brexit, which makes monetary policy in the next twelve months unpredictable.

“It’s worthy of note that the Bank of England says its response to Brexit could be to shift policy in either direction. So it could cut rates if it sees a disorderly Brexit damaging economic growth, though it might be forced to hike rates if there’s a run on the pound. Alternatively a cosy agreement on the UK’s withdrawal from the EU could see rates move higher as we would be rid of a key source of macro-economic uncertainty. The range of possible permutations serves as a reminder of the difficulty of predicting the financial effects of something as dynamic and complex as Brexit. Even if you guess the right political outcome, asset prices may not move in the way you expect.

“In the longer term, economic projections from both the Bank of England and the OBR paint a pretty dreary picture of the UK’s prospects. Growth is expected to be present, but muted, and that suggests low interest rates for the foreseeable future.

“In the US, the economy has performed so well that interest rates are now above 2% and are heading towards more normal levels for the first time since the financial crisis. These sunny uplands look a long way off for the UK economy.”

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