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Impact of jobs data on rates

ended 11. July 2023

Average pay jumped by a record 7.3% according to data for May released this morning, fuelling fears interest rates could hit 7%. More rate rises are now almost certainly nailed on as markets will be concerned high inflation will remain for longer. If this happens, what will it mean for borrowers and the property market? How high could mortgage rates go in your mind?

5 responses from the Newspage community

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Editor
Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
Wages grew by 7.3% but only 6.9% including bonuses meaning employers are being less generous with their total remuneration packages. Despite this enormous increase, real pay fell as inflation is so high. Unemployment rose to 4% and the amount of people taking second jobs also increased. Overall, the Bank of England will be fairly happy with the restraint shown in the private sector, and this will likely be reflected in the next inflation print. As the central bank would welcome a recession to quell inflation, they will also be pleased to see the increase in unemployment.
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Justin Moy
Managing Director at EHF Mortgages
Record pay rises will only fuel inflation, and that is not the news the government wanted to see. Unfortunately, this will trigger more uncertainty, increasing mortgage rates and pushing up the base rate - 6% is definitely on the table by the end of Summer if nothing else more positive comes along. Fixed rates above 7% are realistic. What it does demonstrate though is that increasing the base rate is not the total solution to inflation management and that other options must now be brought in by the government - such as increases in VAT, which would be a way of spreading the responsibility across the whole population, not just targeted at the mortgage borrowers. We are quickly moving to recession, intervention is required now.
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Daniel Wiltshire
Actuary & IFA at Wiltshire Wealth
Looking at the numbers, it's hard not to conclude that we're headed for a property market bloodbath. Mortgage rates are already unsustainable for huge swathes of the population. As more households reach the end of their fixed terms, sadly, we're likely to see increasing numbers of forced sales.
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Graham Cox
Director at Bridging Hub
I have very little confidence in Andrew Bailey or the Bank of England to bring inflation under control. At least with as little damage to people's livelihoods as possible. They'll continue hiking the base rate overly aggressively, without waiting for the existing rate increases to take effect.

Not only did the Bank raise the base rate far too timidly early last year, but they failed to recognize how much inflation was coming down the pipe. Now they're playing catchup and the result will be interest rates much higher than they needed to be. Peaking around 6-6.5 percent would be my guess, with mortgage rates around 7-8 percent. If this happens, we'll see a tsunami of forced sellers and a full-blown house price crash.
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Paul Welch
Founder and CEO at Largemortgageloans.com
In the current economic climate, you'd have more success guessing how long a piece of string is than you will with predicting rates. Spiralling inflation, escalating cost of living, wage pressures, soaring mortgage rates - we're caught in a vicious cycle that urgently needs breaking. In a stable economy, we can make educated guesses on rate directions. However, today's situation defies prediction. Just last week, I was projecting 7% mortgage rates by summer's end; now, looking at the latest data, 7.5% or even 8% seems possible. The key will be this month's core inflation figure and the subsequent response in swaps. The answer, it seems, is as elusive as the length of that proverbial piece of string.