Interest rate hold will benefit P2P, predicts leading economist

THE BASE rate is likely to remain at 0.25 per cent for at least another month, boosting investor interest in the peer-to-peer sector, a leading economist has predicted.

Professor Vicky Pryce told Peer-to-Peer Finance News that she expects the Bank of England to “take a breath” before changing the base rate again, and this could result in a boost for P2P lenders.

“While interest rates stay low, P2P lending will probably do rather well,” she said. “The banks will be bypassed.”

Pryce added that the banks appear to be unwilling to pass on their liquidity to borrowers, while there is “a complete unwillingness for people to invest while the rate is low”.

The base rate is reviewed every month by the Bank of England’s Monetary Policy Committee, and the next update will be announced at noon today.

In August, rates were cut to an all-time low of 0.25 per cent, after being held at 0.5 per cent since 2009. At the time, Bank of England Governor Mark Carney said that he would not rule out further base rate reductions.

His decision to lower the interest rate in the wake of the Brexit vote has since been criticised by some MPs who say he acted too quickly, a suggestion Carney has refuted.

Pryce does not think that the MPC will vote to cut rates again soon.

“I would guess that what they are going to do is take a breath and see what the impact of their previous actions has been,” she said. “They will wait.”