• Home
  • News
    • People moves
    • Africa
    • Asia
    • Australia
    • Canada
    • Caribbean
    • Domicile
    • Europe
    • Latin America
    • North America
    • Middle East
    • US
    • US
    • UK
  • Products
    • Funds
    • Pensions
    • Platforms
    • Insurance
    • Investments
    • Private Banking
    • Citizenship
    • Mortgages
    • Taxation
  • Fintech
  • Regulation
  • In Depth
  • Special Reports
  • Video
  • Directory
  • Advertise with us
  • Events
  • Middle East Hub
  • Newsletters
  • Follow us
    • Twitter
    • LinkedIn
    • Newsletters
  • Advertise with us
  • Events
    • Upcoming events
      View all events
  • Middle East Hub
International Investment
International Investment

Sponsored by

Sharing Alpha
  • Home
  • News
  • Products
  • Fintech
  • Regulation
  • In Depth
  • Special Reports
  • Video
  • Directory
  • Mortgages

Industry slams BoE’s decision to hike rates

Industry slams BoE’s decision to hike rates
  • Pedro Gonçalves
  • 02 August 2018
  • Tweet  
  • Facebook  
  • LinkedIn  
  • Send to  

The Bank of England has raised interest rates from 0.5% to 0.75%, the highest level since the financial crisis almost a decade ago, with the financial sector warning that it is taking a gamble as the outcome of Brexit remains unclear.

Several experts have challenged the need for a rise now, given not only the Brexit risks but also the backdrop of a sluggish economy and the potential negative impact from US President Donald Trump’s import tariffs in global growth.

Related articles

  • Bank of England rate rise – reaction round-up
  • BoE keeps rates on hold pending economy’s performance in 2H2018
  • Bank of England holds rate at 0.75% as it awaits Brexit clarity
  • BoE’s decision in line with expectations

The interest rate hike has been slammed as “premature” by the chief executive of deVere Group, who added the decision could be “motivated to protect reputations.”

“Hiking interest rates now – for only the second time since the financial crash – is, to my mind, premature.

“At just above the Bank’s target of 2%, inflation is not currently a key issue. In addition, major uncertainty surrounding Brexit, the looming threat of international trade wars, and absolutely average economic growth, business and consumer confidence are on the slide.

“As such, there seems little real justification to increase interest rates now,” said Nigel Green.

“Whilst today’s decision to hike rates is unnecessary, I think that the Bank is likely to refrain from any more increases until after Brexit,” he added.

For Aviva Investors, the BoE has to tread carefully from now on.

“We hope the Bank is right. But growth is not that robust and is vulnerable to those known and unknown shocks, confidence is mixed at best and inflationary pressures are pretty muted across the economy. A base rate rise to 0.75% is not going to derail the economy.

But it is not entirely clear that a hike was merited in today’s circumstances, nor that further increases will be necessary either. The Bank needs to tread cautiously from here and will be monitoring any impact of today’s decision very carefully,” said Stewart Robertson, senior economist at Aviva Investors.

The increase is only the second time the BoE has lifted interest rates in 11 years, following its increase from a post-Brexit emergency low of 0.25% in October last year.

Raising interest rates will mean higher borrowing costs on mortgages and loans for hard-pressed consumers and businesses as they adapt to Britain leaving the EU.

“Looking forward two factors will be critical in determining future interest rates. First the final Brexit trade deal will impact the level of sterling and hence inflation.

Second is the labour market and whether wage pressures intensify, especially in the public sector, become embedded and strengthen inflationary trends.

If sterling depreciates and wage increases lead to higher prices, there will be pressure for interest rates to rise higher and faster than markets currently expect,” said Nick Dixon, investment director at Aegon.

Several experts had urged the Bank to keep rates on hold to help support jobs and growth amid mounting fears about the economic impact of Britain crashing out of the EU without a deal.

Philip Smeaton, chief investment officer at Sanlam UK said: “With the Fed hiking interest rates, the European Central Bank winding down quantitative easing, and even the Bank of Japan building in the flexibility to reduce monetary stimulus, the Bank of England must have felt left out.

Today Mark Carney and the MPC reluctantly raised rates by a quarter of a percent while house prices stagnate, businesses postpone investment, and consumers think twice about using their credit cards.

Continuing positive employment figures and wage growth help to justify today’s increase and the Bank will be hoping that the economy strengthens in the second half of the year. But with the clock ticking on a Brexit deal and nervousness on the high street, this optimism might be misplaced.”

The Bank’s Monetary Policy Committee had been expected to raise interest rates in May, but held fire because the economy went through a weak patch at the start of the year.

Led by governor Mark Carney, the Bank is now confident that the dip was temporary and that economic growth will recover from the 0.2% rate seen in the first quarter, to 0.4% in the second quarter and maintain that pace later in the year.

The pound was trading down 0.82% against the dollar after the Bank of England’s monetary policy committee unanimous vote.

  • Tweet  
  • Facebook  
  • LinkedIn  
  • Send to  
  • Topics
  • Mortgages
  • UK
  • Aegon
  • Aviva
  • Bank of England
  • Brexit
  • deVere
  • Rates
  • Sanlam UK

More on Mortgages

Australian watchdog cancels AFS licence of Southern Mortgages

  • Mortgages
  • 08 November 2019
Tesco sells mortgage portfolio to Lloyds in £3.8bn deal

  • Mortgages
  • 03 September 2019
HSBC to lend extra £35bn to UK home buyers as mortgage approvals hit two-year high

  • Mortgages
  • 02 September 2019
HSBC Singapore launches new int'l mortgage solution

  • Mortgages
  • 07 August 2019
Deutsche Bank Wealth Management enters UK mortgage market

  • Mortgages
  • 30 May 2019
Back to Top

Most read

EXCLUSIVE: deVere agrees sale of South Africa business
EXCLUSIVE: deVere agrees sale of South Africa business
US FATCA crackdown pushing demand for tax advice
US FATCA crackdown pushing demand for tax advice
Kuwait to ban diabetic expats
Kuwait to ban diabetic expats
Cayman National Bank IOM confirms customer account details stolen in hack
Cayman National Bank IOM confirms customer account details stolen in hack
Hong Kong rules that trustees are protected under anti-Bartlett clauses
Hong Kong rules that trustees are protected under anti-Bartlett clauses
  • Contact Us
  • Marketing solutions
  • About Incisive Media
  • Terms and conditions
  • Policies
  • Careers
  • Twitter
  • LinkedIn
  • Newsletters

© Incisive Business Media (IP) Limited, Published by Incisive Business Media Limited, New London House, 172 Drury Lane, London WC2B 5QR, registered in England and Wales with company registration numbers 09177174 & 09178013

Digital publisher of the year
Digital publisher of the year 2010, 2013, 2016 & 2017