…unintended consequences

Whilst many market commentators welcomed the Bank of England’s £50billion injection of liquidity in the banking system we have not seen any positive effects in the mortgage market. 

In fact, since the announcement the money markets are pricing in less aggressive future interest rate cuts from the Bank of England.  This has resulted in an increase in the cost to banks when creating fixed rate mortgage products, and thus an increase in the fixed rate mortgage products available to consumers.

The Bank of England need to reassure the markets that they will continue to cut interest rates.  Hopefully we will hear some reassuring words from the Monetary Policy Committee’s arch dove, David Blanchflower, during his speech today for the David Hume Institute at The Royal Society of Edinburgh.