Is the Bank of England about to raise interest rates?

12 February 2014

There were 26,700 new first-time homeowners in December 2013, 37% more than the previous year - a statistic many have claimed is a strong indicator the Bank of England will raise interest rates quicker than previously thought.

In 2013 as a whole, 268,800 people took their first step onto the property ladder, according to the Council for Mortgage Lenders (CML). That was an increase of just over 23% from 2012.

Mortgage lending also improved in 2013 for existing homeowners, with 605,000 taking out loans to move home or remortgage, up 11% year-on-year.
In response to the emergence of more positive economic data - such as a reduction in the unemployment rate and improving growth forecasts, as well as the mortgage figures above - speculation has been growing that the Bank of England may increase the base rate.

The falling unemployment rate in particular has stoked much of the speculation as it has currently fallen to just 0.1 percentage points above the 7% level the Bank said it would have to reach before it would consider raising rates.
However, Bank governor Mark Carney today reiterated that unemployment was only one of many economic factors it considers when setting the base rate.

He added that the UK economic recovery was not secure and could not yet support a rate rise.

"A few quarters of above trend growth driven by household spending are a good start but they aren't sufficient for sustained momentum," he said.

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