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Ian McCafferty and Martin Weale voted against the proposition, preferring to increase bank rate by 25 basis points, while seven members of the committee, including BOE governor Mark Carney, voted in favour of rates remaining at 0.5 per cent.
Released last week, the minutes of the central bank’s monetary policy committee meeting on August 6 and 7 noted that a potential over-reaction in financial markets was not necessarily a reason to delay an increase in rates if that were merited by the economic data.
“For two members, in particular, economic circumstances were sufficient to justify an immediate rise in bank rate,” the minutes said.
“These members noted that the continuing rapid fall in unemployment alongside survey evidence of tightening in the labour market created a prospect that wage growth would pick up.
“In the judgement of these members, even after a rise of 25 basis points in bank rate, monetary policy would remain extremely supportive, and an early rise would facilitate the committee’s aspiration that the rises in bank rate should be only gradual.
“These members further noted that, while there were always likely to be risks associated with the possible financial market reaction to the first increase in bank rate after such a protracted period, it was unclear that these risks would be lessened, and indeed possible they would be augmented, by delaying that increase.”
The UK lending market has been adapting to legislative changes implemented earlier in the year.
In April, the Financial Conduct Authority (FCR) initiated the Mortgage Market Review (MMR), which included further affordability assessments to be carried out by lenders, and the removal of such assessments to be carried out by brokers.
The UK market saw 5,000 more mortgages approved in June following four consecutive months of falls, while the number of mortgage applications also increased slightly, according to the BOE minutes.
“Together, these data supported intelligence gained from the major UK lenders that the immediate negative effect on lending activity associated with the implementation of the Mortgage Market Review was beginning to wane,” the minutes said.
“Most lenders expected that its impact would continue to subside in July.”