The year has started with the news that inflation has fallen to 0.5% which in the short term can’t be a bad thing. It is well publicised that the fall is down to falling oil prices and remarkably savings have been passed on to the consumer at the pumps. Most commentators seem to think that a fall in inflation in the short term is not a bad thing and will put a little more money in our pockets. It would also appear that wage inflation has outstripped inflation over the last couple of months. I have always said that when wages consistently rise over and above inflation that interest rates would be affected. I think inflation will head back towards 2% by the end of the year and all the fuss will be over.
Early days yet as inflation has outstripped wage rises for about the last seven years so there is a bit of catching up to do. As a whole I think the majority of the country have become poorer in real terms over the last seven or eight years and despite much bluster and propaganda from the powers that be the economy is perhaps not quite as rosy as they make out. We are borrowing more as individuals and so is the government. Although there was a lean towards austerity a few years ago it seems to have made little difference.
My not so bold statement is that interest rates will not rise in 2015 and my prediction is that we won’t see a rise until at least mid 2016 at the earliest.
Look at the mortgage deals available at the moment. Loads of lenders are offering sub 3% mortgages fixed for five years. They must be pretty confident rates are not going up. If you are not concerned about a potential rate rise then with 40% equity you can get a tracker rate as low as 1.29% currently. These deals are around and the market remains massively competitive.
Mortgage approvals are down and this has contributed to a bit of a rate war in the marketplace to try and boost demand. Although first time buyer approvals are up according to the money charity the average deposit for first time buyers was £28,030 in October 2014. Still, therefore difficult to get on the housing ladder without help from the bank of Mum and Dad. Especially in London where rents are 139% higher for a two bedroom house than the England average.
Help to Buy is a good scheme and I think it is certainly helping fuel the market but house prices are generally too high and so an increase in supply is required to correct the imbalance. This has long been a complaint and nothing has been done about it for years and it requires some serious investment, the UK population grew by an estimated 1,223 people per day between 2003 and 2013. That is an awful lot of people and they need to live somewhere.
Further not so bold predictions are that Chelsea will win the Premier League, five premier league managers will be looking for work by May. England will not regain the ashes in Cricket. England will not win the Rugby World Cup. Preston North End will fight heroically in the League One play offs but in vain! Finally, Page Three will return…..