Barclays brokers (September 2012 Bulletin) reported a boost in UK economy recovery hopes, with signs that it is finally approaching â€˜escape velocityâ€™.
However, they warn that we should not forget the recession has been unusually deep and protracted and there are considerable challenges to achieving a self-sustaining recovery. Household budgets continue to be squeezed by well-below-inflation earnings growth and public spending cuts are eating further into living standards.
- Improving confidence is underpinning consumersâ€™ willingness to spend, helped by an upturn in the housing market and stronger equity prices.
- Smaller business turnover growth has become more robust, reflecting the general improvement in trading conditions as the broader UK economy becomes increasingly resilient.
- The appetite to borrow may have started to recover, but it will take time for firms to have sufficient confidence to rely on business debt financing to take advantage of the improving trading outlook.
What about commercial mortgage interest rates?
- Attention has recently focused on the Bank of Englandâ€™s decision to adopt â€˜forward guidanceâ€™ to signal the likely course of interest rates, stating that it does not intend to raise Bank Rate before the unemployment rate has fallen to 7% from the current 7.7%.
- Policymakers expect this to be achieved in about three years, but see this as a â€˜way stationâ€™ to reassess the progress of the economic recovery, rather than a definite trigger to increase interest rates.
- Equally, the guidance would be reviewed if inflation expectations risked being dislodged, jeopardising the achievement of the 2% inflation target, or threats to financial stability arose.
- Although the latest move has provided greater clarity around the Bank of Englandâ€™s thinking, it does not fundamentally change policy. The improvement in the economic news was welcomed, but it cautioned that there was still a considerable way to go to restore activity to its pre-crisis peak.
- Securing economic recovery now appears more prominently on the policy agenda, but it remains subservient to keeping inflation pressures in check. Ultimately, it will be the emerging data that determine when Bank Rate is raised.
Should I borrow now?
If you are looking for the best rates for new commercial mortgages or deciding whether the time is right for business debt refinancing, Stewart Hindley & Partners are experts in this field so Contact us now for further advice and information.