Interest in mortgages shot upwards last week, brokers have said, following the Bank of England's announcement that interest rates were likely to remain low for another three years.
The Bank’s “forward guidance” strategy delivered by new Governor Mark Carney has pledged to keep interest rates at their record low 0.5% until the rate of unemployment falls to 7%, which is estimated to take three years.
The move, designed to add ‘stability’, has been criticised for adding confusion to the markets. But it has had clearly had the desired effect on the housing market, with mortgage brokers receiving a surge in requests since the new strategy was laid out.
Andrew Montlake, director of mortgage broker Coreco, said there had been “an influx of enquiries” from borrowers with renewed confidence in taking on short-term fixed-rate deals.
The focus on unemployment would retain low rates, he said, which would give borrowers extra surety that mortgage repayments would not rise suddenly to unaffordable levels.
“This is a major step to ensuring the property price growth we are already seeing takes root,” he said.
“I expect the Governors' announcement to lead to a greater stampede of people wanting to take advantage of the record low rates.”
Jobless Total Could Fall Faster
But new data suggests that the jobless target of 7%, which would require the creation of another 750,000 jobs, could be reached sooner than the bank’s anticipated target of 2016.
The latest Labour Market Outlook report from the Chartered Institute of Personnel Development suggests that recruitment prospects are currently at a stronger level than over any period of the last four years.
The difference between the proportion of employers who expect to recruit and those who expect to downsize is at +14 for the current quarter, it says, compared to just +5 in the winter and -8 during the previous winter.
One of the ways in which firms are funding new recruits is by cutting down on the costs of recruitment, such as the use of agencies and private consultants. A quarter of private-sector firms said that they were likely to use social media as part of their recruitment strategy.
Keith McDonald
Which4U Editor
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