Yet more speculation over interest rates rise

Scott Woods. ENGANL00120121201170550
Scott Woods. ENGANL00120121201170550

Money Matters by Scott Woods

The Bank of England could raise the base interest rate from its record low level before the end of this year.

News from the Lincs Free Press and Spalding Guardian, spaldingtoday.co.uk, @LincsFreePress on Twitter

News from the Lincs Free Press and Spalding Guardian, spaldingtoday.co.uk, @LincsFreePress on Twitter

That’s according to Christine Johnson, head of fixed income at Old Mutual Global Investors, formerly Old Mutual Asset Managers.

Ms Johnson, manager of Monthly Income Bond and Corporate Bond funds, said investors needed to “start thinking about how to protect themselves from rising rates.”

She added: “I think there is a good chance that there will be a rate rise this year.

“Bank of England governor Mark Carney is signalling that we have to think about what a rate rise might mean because it’s happening sooner rather than later.

“The UK economy is doing much better and I expect there is going to be a little hop in growth expectations for the UK in the Chancellor’s Budget Statement this month.”

Ms Johnson’s views echo that of M&G Investments multi-asset managers Stephen Andrew and Eric Lonergan who have positioned their funds to benefit from their forecast that interest rates in the UK will rise sooner than expected, before settling at a level lower than expected.

The base interest rate has been 0.5 per cent for five years since the height of the financial crisis in a bid to force investors out of cash and stimulate asset growth.

The Bank of England initially indicated that it would reassess the case for ultra-low rates when the unemployment rate reached seven per cent, but it has since removed this as an indicator.

Whilst this news will give some comfort to investors whose cash holdings have been languishing, those with non-fixed rate mortgages could perhaps start to look at their options.

This is especially so if the recent upturn in the housing market has led to increased property equity and therefore the potential of better re-mortgage options.