Timing of mortgage rate rise looks less certain after Bank of England meeting

Minutes of May meeting show policymakers disagreed over the strength of the recovery and when to raise rates

The prospect of a rise in mortgage rates next spring looks more uncertain after Bank of Engand policymakers appeared to be split over when to end the UK's five years of cheap credit.

The nine-strong monetary policy committee was divided at its meeting earlier this month after a sharp fall in unemployment and rapid GDP growth contrasted with low average wage rises and a lack of lending to small businesses.

The first sign of major split on the MPC since governor Mark Carney took up his post last summer sent the pound higher as investors bet that interest rates would rise earlier than predicted.

Economists had expected the Bank to begin raising rates early next year, but minutes of the MPC's April meeting showed that policymakers disagreed over the strength of the recovery and when to raise rates back to more normal levels.

Some committee members, including Bank insider Paul Fisher and former City economist David Miles, are known to be doveish supporters of freezing rates until next year. Chief economist Spencer Dale and Ben Broadbent, who is soon to become a deputy governor, have voiced concerns that delays in raising interest rates will allow the economy to overheat.

According to the minutes, members held different views on the capacity of firms to expand output without raising wages, whether the rise in self-employment represented millions of workers being under-employed; and the extent to which an expansion in cheap labour undermined hopes of productivity gains.

Nevertheless they voted unanimously to keep base rates at 0.5% and keep the stock of bonds bought by the Bank under its quantitative easing programme at £375bn and signalled that when rates rise it will be a slow process, stopping well before the previous 4% to 5% average.


Phillip Inman, economics correspondent

The GuardianTramp

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