Brexit looms over interest rate decision

The Bank of England’s monetary policy committee has held interest rates again with a unanimous 9-0 vote yesterday and experts say there is zero chance of a hike ahead of the Brexit referendum on 23 June.

The MPC warned that a vote to leave the EU “might result in a period of uncertainty about the economic outlook” which would be likely to push down on demand in the short run.

Capital expenditure and commercial property transactions are already being postponed until after the vote.

In the case of a Brexit, monetary policy will become a lot more complicated, it said.

Ian Kernohan, economist at Royal London Asset Management, said: “The MPC has reiterated its expectation that rates are likely to rise at some point, but nothing will happen until the fog of Brexit clears.”

Jeremy Duncombe, director Legal & General Mortgage Club, said that yesterday’s result reinforces predictions that interest rates are likely to remain at record-low levels until next year.

“Whilst this is good news for many homeowners, it is vital that potential borrowers and those looking to remortgage do not get complacent about these rock-bottom rates.

“The temptation to delay looking at new mortgage deals should be ignored, as mortgage rates are not directly linked to base rates. 

“Anyone who is thinking about re-mortgaging should therefore speak to a broker now to find out about the best product for their individual circumstances, before these deals disappear.”

Matt Andrews, managing director, Bluestone Mortgages, said that although a continued low-rate environment could provide a good opportunity to secure favourable loan rates, too many UK workers struggle to access lending due to their complex financial circumstances.

“This includes self-employed customers and contractors with inconsistent cash flows, or limited trading history, as well as customers with adverse credit histories who tend to fall outside of conventional credit scoring models.

“These borrowers require a deeper underwriting experience to ensure the nature of their situation is fully understood.

“Innovation in lending is absolutely needed to cater to this sector of the market, however, a balance must be struck between automated technology, and intelligent technology.

"Technology in the mortgage market needs to retain its human touch.”