Predicted interest rate rises this summer may not immediately hit consumers’ holiday spending, according to Barclays Business Banking UK commercial director David Rundle.
Rundle predicted a time lag in terms of the impact of rates rises, expected to go up by a quarter to 0.5% in July or August.
“A lot of people have heavily borrowed and are fixed out for a couple of years, for example on their houses, and interest rate rises don’t effect them [now]; there is a time lag,” he said, indicating there might not be the anticipated slowdown in immediate customer spending.
Rundle added: “If interest rates went above 10% as they did in the early 1990s we would have a major problem, but we don’t see that happening. We are in a benign period and waiting to see what happens. It might be the same for the holiday market.”
But Co-operative Travel Group managing director Mike Greenacre feared the average consumer would struggle to justify a holiday against increased interest rate rises. “I have some concerns. It means having to balance a holiday with mortgage increases,” he said.
Monarch Airlines chief executive Peter Brown said a recent improvement gave a glimmer of hope for summer sales.
“We have seen some improvement in sales in the last few weeks and if that carries on we can have an acceptable peak [period] but it’s not going to be easy,” Brown said. “We are having to sell a lot of flights cheaply because demand has been weak.”
Specialist tour operators and cruiselines reported more buoyant sales. Royal Caribbean International managing director Robin Shaw said: “We are seeing double digit growth growth or 2007/08.”
Meanwhile, Rundle added the currency market was stable. “It’s about the most stable forward-looking currency outlook I have seen. There’s not much volatility at the moment.”
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