SHADOW MPC
THIS MONTH’S DECISION: HOLD
● With the
effects of
economic
stimulus
packages still
unclear, this
month the GE
Money Home
Lending
Shadow
Monetary
Policy
Committee
votes to hold
the base rate
22
MELANIE BIEN
DIRECTOR, SAVILLS PRIVATE FINANCE
DECISION: HOLD
Last month the Monetary Policy Committee
was unanimous in its decision to hold the
Bank of England base rate at 0.5% and also voted in
favour of continuing with quantitative easing. It is
unlikely that this stance will change this month. Given
that the emphasis is on quantitative easing, further rate
cuts at this time would have little impact. The MPC will
instead focus on the timing of the asset purchase
programme and whether enough money has been
allocated to it. Following February’s increase in
consumer price index inflation to 3.2%, March saw it fall
to 2.9%, more in line with expectations although a
slightly larger fall had been forecast. Meanwhile, the
retail prices index fell to -0.4%, the first negative since
1960. There has been much talk of deflation and the need
to raise rates to counteract this but underlying
inflationary pressures still exist so I vote for a hold.
VIC JANNELS
CHAIRMAN, ALL TYPES OF MORTGAGES
DECISION: HOLD
The Budget delivered a mixture of gloom and
despair, demonstrating to all except those
controlling our financial destiny that hidden behind the
veneer is increased pain for high earners and those with
substantial pensions. It also showed that a return of
meaningful income for investors is not on the cards, so
the Budget will not breed confidence. The money
markets, starting to show signs of tangible recovery, will
probably have a tough time in the coming months and
there was nothing to boost confidence in the housing
sector. We are still not seeing the effects of government
funding which, we were told, was delivered specifically
for this purpose. With redundancies and repossessions
continuing to rise it is difficult to see how another rate
change would help, so I vote for a hold.
CHRIS MAY
DIRECTOR, VISION NETWORK
DECISION: -0.5%
We have seen modest gains made by global
stock markets on the back of better than
expected results from some US banks but generally there
is so much uncertainty that the markets seem to panic
every few days following any negative news item, the
latest example being swine flu. The retail sector is still
bruised and although we have seen smaller price declines
in the housing sector recently, this is nothing to shout
about. Together with last month’s lending figures which
show a fall on the amount of lending for new purchases,
the indications are that this is going to be a long and
tough recession with no quick fixes. I’m afraid we are
running out of options and simply have to wait and see
what happens with the stimulus packages the
government has implemented. That’s why I believe the
base rate will drop to zero. So this month I vote for a
0.5% cut.
DEV MALLE
SALES DIRECTOR, PERSONAL TOUCH FINANCIAL
SERVICES
DECISION: HOLD
Retail price inflation falling to -0.4% – the
first time it has been negative for 50 years – and output
contracting faster than expected mean chancellor
Alistair Darling’s growth predictions that were once
considered pessimistic now appear over-optimistic.
Having agreed a quantitative easing package of £150bn
and only achieved £25bn in asset purchases there is some
way to go before we see the full impact this has on
inflation, demand and growth. With little room to
manoeuvre on interest rates we are likely to see the base
rate remaining static for some time despite the worsening
unemployment and deflation position while we evaluate
the impact of the government’s initiatives. So I vote for a
hold this month.
MORTGAGE STRATEGY May 4, 2009
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