Shine wears off as poll predicts earlier rate hike

A NEW poll suggests that less than a quarter of households expect interest rates to stay low until 2016, despite Bank of England governor Mark Carney’s policy on forward guidance.

A full 69 per cent of households polled by Ipsos Mori on behalf of Markit expect an interest rate hike within the next two years, before the mid-2016 forecast of the monetary policy committee (MPC).

Only 24 per cent of households polled believe that interest rates will be held at their current historical low for over two more years. The Bank’s decisions are now informed by the rate of unemployment: members of the MPC say they will not consider hiking rates until the rate of joblessness falls to seven per cent.

Attitudes have hardened against the Bank’s prediction since August, when it was announced. Only two months ago, 39 per cent thought that the next hike in rates would not happen for at least two years.

Markit’s chief economist Chris Williamson said: “Economic indicators have pointed to a strong upturn in the pace of economic growth, and there has been a particular widely-reported improvement in the housing market in the media.”

Williamson added: “Given current trends, the prospect of higher rates seems to have had little impact on the demand for home loans and spending. However, the worry is that higher borrowing costs will hit the recovery hard if interest rates start to rise before incomes show a sustainable upturn in real terms.”