Cover of MoneyWeek magazine issue no 696

Worth a flutter? Our experts pick the best shares to back

20 June 2014 / Issue 696

How might QE in Europe affect markets? And where should investors look for profits? John Stepek chairs our Roundtable.
Read this week's cover story here

Four surprises that may delay a rate rise
Risky play on California water shortage
Why it could pay to delay your retirement

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Merryn Somerset WebbEDITOR'S LETTER

Merryn Somerset Webb

Just when will rates rise?

Last week, the governor of the Bank of England, Mark Carney, suggested that interest rates in the UK might rise sooner than the market expects. You can see why he might feel the need to flag this up. UK GDP has grown rather faster than expected recently: in the last quarter, the economy grew by 3.1% compared to a year ago.

But to think that interest rates will soon rise, you also have to think that growth is likely to continue to surprise on the upside.

That, as anyone on the MoneyWeek cruise with me this week (we’ve done Venice and are heading for Dubrovnik as I write) will know, is not a given. Why? Bank lending, as James Ferguson has been explaining.

In a modern economy that is genuinely recovering, you’d expect to see lending rising. But – despite the impression given by the banks’ PR campaign – that just isn’t the case. Net mortgage lending has risen slightly since the financial crisis, but all other lending hasn’t. Instead, it has been falling.

That, says James, tells us that our banks aren’t yet completely fixed (a view shared by some of the participants in our Roundtable this week). Banks with clean balance sheets lend new money, banks without them don’t.

• Read the full editor’s letter here: Just when will rates rise?