Following the recent events with the global stock market chaos, and fears that China’s economy is faltering, more experts believe that the record low cost of UK borrowing will continue for longer than expected.
New City forecasts have indicated that a rate increase will not occur until autumn 2016, particularly because of the FTSE being down 15 per cent and developments in China and world markets.
This week, the British Bankers Association (BBA) stated that the number of people fixing their loans at low rates was the highest it had been for four years, following predictions earlier this month that a rate rise was likely to happen in the first half of next year.
Paul Hollingsworth, an economist at Capital Economics, said: “Recent equity market volatility and the further fall in commodity prices is probably the final nail in the coffin for those entertaining the possibility of a rise in bank rate this year.
“But we think markets have gone too far in expecting the MPC to hold off until October next year.”
However, though some are claiming that events in China will have a limited impact on a UK rate rise, especially as only five per cent of British exports are currently destined for the country, it is likely that the rate rise will be delayed for longer than expected.
Richard Woolhouse, the BBA’s chief economist, said: “Everything that has happened in China this week puts the likelihood of that rise back two to three months.
“But even if rates do go up in the near future, I don’t think mortgage rates will go up as much and, in any case, this won’t impact much on people’s decision to buy a house.”