Articles > Mixed Outlook

Recent figures show that overall confidence is falling, something that is illustrated well by the lowest growth in credit card borrowing for eleven years. With plastic being the payment option of choice for most shoppers, you can see that spending on the high street is certainly subdued.

On the flipside, the property market is seeing something of a recovery of late, with house prices rising 1.3 percent last month alone, a real turnaround from the 0.2 percent decline seen in the two previous months. The number of mortgage approvals also increased during October, a sign that the market is growing and is happy with the increased asking prices.

If you do not run your own high-street shop, and are not in the market for a new house then you may think that none of this will affect you at all, at least not directly. The fact is that these happening have more of an influence on your finances than you may think, as they will be taken into account by the Bank of England when setting the base rate of interest. The most noticeable place any change in this will be seen is in mortgage rates, unless you have a fixed rate then any change in the base rate will be reflected in this.

Whether the interest rates will change during this year is hotly debated, and in truth no one really knows for sure what will happen, the struggling retail sector would indicate that a cut is needed, whereas the strengthening housing market suggests that the rates should remain unchanged to maintain a steady and sustainable growth. So how will the MPC, the committee that decides what the base rate should be, decide on what to do? Well, they are likely to concentrate on the inflationary target of two-percent, and although these other factors may influence them, with such conflicting scenarios they may well opt to hold rates unchanged for the remainder of the year.

With the housing doing well, and the Christmas period just around the corner which should provide the much-needed boost to consumer spending combined with the falling oil prices thanks to mild weather, inflation is likely to fall more inline with the target naturally, and hence the economy should stabilise itself without the need for a rate change, at least not during this year.