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TODAY'S OTHER NEWS

Interest rates to rise after Christmas

The mortgage industry can expect the first interest rate hike shortly after Christmas, experts say.

The National Institute of Economic and Social Research (NIESR) has claimed that rates will rise in February 2016, pushing up mortgages costs for millions of families. 

It forecast that rates would ‘gradually increase’ after that before hitting 2% by the end of 2018.

The NIESR said the rate hike would come despite the recent slowdown in the UK economy.

NIESR economist Jack Meaning said: “This softening in growth is temporary with a rebound expected in the final quarter of this year.”

Latest figures suggest the UK is rebounding again, with manufacturing, construction and services sector all beating expectations.

Jeremy Cook, chief economist at World First, said the UK services sector has posted 34 consecutive months of expansion while manufacturing fit a 16-month high.

He said this suggested the recent downturn was a "blip and not the beginning of anything more sustained or prolonged”.

Cook added that recent higher wage increases were a "silver bullet” for the UK economy and should help trigger a rate hike.

“They allow consumers to re-balance spending figures from credit uptake and promote growth in generalised output with a central bank more comfortable to normalise monetary policy.”

Joshua Mahoney, market analyst at IG, said: “The huge outperformance of the UK manufacturing gives yet another nod to Mark Carney that the UK economy is booming, despite a weaker-than-expected Q3 GDP figure last week.

“Improved business in both domestic and export sector shows brand UK is well and truly booming once more.”

The NIESR's forecast comes ahead of tomorrow’s inflation report at the Bank of England where governor Mark Carney will be quizzed over the outlook for interest rates.

An increase in the base rate to 0.75% would add £18 a month or £216 a year to a typical £150,000 lifetime tracker mortgage.

Kallum Pickering, senior UK economist at Berenberg, said: “Markets are beginning to take the prospect of a rate hike happening sooner rather than later more seriously."

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    cant see it, with the effect of work placed pensions sucking at least 6% of income between employee and employer, there is no good reasoning to increase interest rates. In the last two weeks we have seen fixed rate mortgages over 2-3 and 5 year term decrease, which is a clear indication that lenders are borrowing the money cheaper and if anything interest rates may drop by 0.25%

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