At his annual Mansion House speech in London last week, Chancellor George Osborne announced that the Bank of England is to get new powers to control the size of mortgages in the UK if a new property bubble threatens the recovery of the economy. Also speaking at Mansion House was Govenor Mark Carney, who said that the interest rate could go up sooner than the markets were expecting.
It had been previously thought that there would be not likely be a rise in the interest rate until 2015, but he stated bluntly in his speech: “It could happen sooner than markets currently expect.”
There has been no let up in the growth of buy-to-let mortgages, as shown by data from the Council of Mortgage Lenders, which show a 43% growth in volume and 57% growth in value, year-on-year, recorded in March. A rise in the interest rate would put up the cost of mortgages for many landlords, possibly pushing a significant number into arrears.
However, it has been speculated that the announcement was merely a ploy to manipulate the markets into reacting to an imminent interest rate hike, which effectively takes the pressure off the Bank of England to actually raise the interest rate. Strangely, because the Govenor says it may rise sooner than expected, it may well end up going up later than expected.