Mr Carney, the master manipulator?


They say actions speak louder than words but try telling that to Bank of England Governor, Mark Carney. He is a financial chief that a nation is still getting to grips with, after years under the steadying leadership of Mervyn King.

So far, Mr Carney had preferred the ‘words speak louder than actions’ tact. He’s not afraid of rhetoric and his speeches quickly find their way into the public domain. And here lies the crux of this blog. There’s has been a lot of hot air and very little action where interest rates are concerned – Mr Carney has left the current 0.5% interest rates untouched since his arrival in July 2013. Could it be that the Governor is using mere suggestion to influence the levels of mortgage borrowing and the wider economy? Are his words enough to get people self-moderating their borrowing?

Much has been made about the Mortgage Market Review and its negative impact on home loans since its introduction early in 2014. However, the latest figures from the British Bankers’ Association (BBA) showed a rise in mortgage approvals from May.

Is it a mere coincidence that home loan approvals are creeping up at a time when many thought they would be diminishing? Perhaps Mr Carney’s frequent alludes to an imminent interest rate rise has got borrowers scurrying to the brokers desperate to fix in to the best deals before rates take an upward turn? After all, the Governor has said he expect a ‘new normal’ interest rate to settle at 2.5% by 2017.

More recently Mr Carney has veered off piste openly discussing how interest rate rises could actually tip the economy back into recession. His concern is about household finances feeling the squeeze, with a contraction of spending in the retail sector as a result of funds being diverted to mortgage repayments. In the same address he did, once again, acknowledge that interest rates must rise.

They must rise but when? Another month ticks past and there’s no movement from the Bank of England. One wonders if Mr Carney delivers his latest speech and then waits for the effect on mortgage lending and house prices before he thinks what to say next, rather what to [I]do[/I] next. Is he a puppeteer carefully choosing which strings to pull next time, manipulating the situation with words rather than actions?
Crucially, is there anything we can learn from Mr Carney on how to shape the lettings market? Pencil sharpened, time to take notes next time.