Budget gives little room for rate rise

Gemma Harle is managing director of TenetLime

In light of the big news in the Comprehensive Spending Review last year, last month’s Budget was always going to be something of a damp squib for professionals in the mortgage industry.

Initiatives such as the support for first-time buyers in new build were more significant in their intent than their scale of execution. What little there was to give away was aimed squarely at private business which is being expected to pick up the pieces after the public sector demolition underway.

Indeed the most significant fact for mortgage brokers was the down grade of growth estimates and their implications for monetary policy. For too long many advisers have been banking on a remortgage boom when interest rates rise.

The revision in growth estimates has put paid to any rise this side of July and probably until Q3 at the earliest.  The GDP figure for Q4 last year at -0.5% was a real game changer. Anything like that again for Q1 this year (I suspect it will be better but not much) and we will be in recession technically again.

Moreover while I suspect there is more lending available this year it is not a quantum leap forward. The government cannot afford to make the fiscal cuts it wants in public sector jobs and hope the private sector holds up while kicking off an explosion of remortgage activity for finance that is not available. Fiscal policy matters but the real deal is in monetary policy for now.