As a platform, we take great pride in all that we've achieved since opening our doors for business nearly six years ago. We’ve
Could a rate rise be on the cards?
Since the Brexit vote, it feels as though things have moved along at a rate of knots within both political and economic spectra. Certainly on Threadneedle Street, it’s been a rather hectic period, with Bank of England Governor Mark Carney spending a lot of time in the headlines.
Carney attracted criticism for his ‘interventions’ during the build-up to the EU Referendum, but it is to his great credit that he has acted decisively since. Indeed, it was the very next day that he announced that £250 billion worth of funds had been made available to the economy in order to maintain stability.
It was of course the Monetary Policy Committee’s decision to cut base rates in August – a continuation of Carney’s so-called ‘quantitative easing’ - which has divided opinion. Many economists argue that this has given the economy the necessary impetus to handle the turmoil following the referendum, and that it has played a key role in most sectors of the economy performing better than expected.
However, it arguably also contributed to the decline of the pound, and has unquestionably had an adverse effect on savers. Such criticism reached fever pitch in the wake of the Conservative Party Conference last month, where the Prime Minister expressed dissatisfaction at the policy of quantitative easing itself.
It meant that speculation over the Bank of England’s future independence became rife, with Carney considering his position over the past week. The Canadian has, however, committed to staying until 2019, and it comes at a time where news for the economy has once again been more positive than expected.
Growth, albeit propelled by the performance of the services sector, exceed all expectations in the third quarter of 2016 – the 0.5 per cent figure making ours the best-performing major economy in the world in that time. Prior forecasts of a recession appear to have dissipated, and Carney now forecasts growth of 1.4 per cent in 2017. Although this would fall below the corresponding forecasts for inflation (adjusted upwards to 2.7 per cent this week), it makes for considerably better reading than the gloomy forecasts which have preceded it.
Such was the air of confidence within the Monetary Policy Committee as a result that it is understood the vote to hold base rates steady at 0.25 per cent on Thursday was unanimous – a significant revelation given previous talk of further cuts. And inevitably, it has sparked suggestion that Britain may well be in for an increase in rates in the near future; one which would represent the first since July 2007.
A boost for savers, curb to inflation
Given the unrelenting strain savers have endured in recent years, it would be difficult to begrudge them the respite of an increase in rates. In early November 2007, base rates were at the heady heights of 5.75 per cent, but the subsequent and sustained plunge to record lows has severely hit savers and pensioners in the pocket. A rates increase would thus go a long way to turning the tide.
Additionally, such an increase would help to curb the escalating figures for inflation; largely for two reasons. Firstly, microeconomic law dictates that interest rates and inflation have an inverse relationship anyway. However, a rates increase would also likely provide some much-needed forward thrust for the sterling. Again, other things equal, such a decision would make foreign investment more attractive, with subsequent inflows of capital strengthening the value of the currency. For an import-heavy economy such as the UK’s, this would no doubt help to halt rising prices across the board.
As with anything in economics, policy changes can be a double-edged sword, and be beneficial for some while being negative for others. For a country with household debt (excluding mortgages) in excess of £350 billion, such a rates increase would put strain on many consumers. Added to that, increased interest rates, and a more contractionary monetary policy, will almost certainly suppress consumption, with reduced spending then providing a headwind of its own for economic growth.
But what seems to be increasingly clear is that the economy is fundamentally stronger than many had previously thought. Frustratingly, economic performance can only be determined, and then analysed, in hindsight, and with forecasts seemingly becoming less and less reliable by the day, predicting the future is an unenviable task for Carney and Co.
Yet there are so many indicators which suggest that our economy is in a decent state of health - certainly healthy enough to withstand the impact of a rise in base rates. So could such a day be on the horizon? Long-suffering savers will certainly hope so.
Main image "Mark Carney" by Policy Exchange. Image subject to copyright. A link to the image and appropriate licence can be found here. You must not use or reproduce this image other than in accordance with the licence.
Our website offers information about saving, investing, tax and other financial matters, but not personal advice. If you're not sure whether peer-to-peer lending is right for you, please seek independent financial advice, and if you decide to invest with Lending Works, please read our Key Lender Information PDF first.
Since opening our doors back in 2014, we’ve always prided ourselves on living and breathing two key principles at Lending Works: innovation, and putting the customer first in everything we do.
With the retail sector enduring its fair share of challenges, companies are looking at new ways to attract customers, and drive conversion. In an overcrowded, dog-eat-dog marketplace, with behemoths such as Amazon flexing their muscle, it’s easier said than done.
On 4 June 2019, the Financial Conduct Authority (FCA) released its new regulatory framework for peer-to-peer lending (P2P); a Policy Statement known as PS19/14. As you might imagine, it's a document which, following a three-month consultation, is a hefty read of no fewer than 102 pages.
In a difficult climate, customer acquisition and lead generation present stern challenges for UK retailers, and a great deal of marketing spend invariably gets directed towards getting feet through the door.
Over the last decade, there can be little dispute that the reputation of mainstream banks – and particularly the so-called ‘Big Four’ (HSBC, Barclays, Lloyds and RBS) – is at its lowest ebb.
The peer-to-peer (P2P) lending industry is now regulated by the Financial Conduct Authority (FCA). The regulatory framework has been designed to protect customers and promote effective competition.
In recent months, it’s been interesting to observe the reception to Greta Thunberg, the 16-year old climate change activist who has been afforded some high-profile forums. The impassioned viewpoints she has shared have earned her legions of fans, albeit no shortage of detractors too. In particular, a speech at the United Nations climate change summit stirred fractious debate.
In the 1970s, it was standard fare for governments to manipulate interest rates, particularly in the run-up to a general election. Lower borrowing costs keep a lid on unemployment, and stimulate economic growth.
For close followers of financial forums, one oft-trotted line among brokers is that fixing one's mortgage has seldom been to the retrospective benefit of the homeowner in the past 25 years.