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UK Interest Rates Latest Update
Interest Rate Update – 19/06/2009Current UK Interest Rate: 0.5%UK Interest Rates Forecast: Bank rate remaining low but swap rates rising Rising swap rates spell bad news for homeowners Although the Bank of England
is keeping interest rates low – and may do so for a few more months
yet – money market swap rates are rising. Swap rates are the interest
rates at which banks and building societies borrow money over the short
and medium term. Fixed mortgage rates
from most lenders have been rising this week. Many experts believe that
mortgage rates will continue to rise through the year, especially as
there is a possibility that the Bank of England will raise the Bank
Rate later this year to help fund government borrowing. Bank of England Publishes June Interest Rate Minutes The Bank of England has published the minutes from the June meeting of the Monetary Policy Committee (MPC). The MPC is the group tasked with setting the Bank Rate, currently sitting at a historic low of 0.5%. The MPC voted unanimously to leave the interest base interest rate unchanged, based on its conclusion that the upside and downside risks to inflation remain equally balanced. One potential upside risk to inflation – rising house prices – was alluded to in the minutes. The MPC noted that housing market activity had improved, with a small increase in the number of home loans approved in May. However, monthly
loan approvals remain at less than half the average from the last decade.
May’s small increase may not be that significant given such low
levels of activity and certainly does not pose an inflationary risk
yet. PREVIOUS UK MORTGAGE INTEREST RATE FORECASTS
UK House Price Forecasts and Predictions Latest Updates
House Price Update 19/06/2009Current UK House Prices Situation: Small increases reported in May UK House Prices Forecast: Stagnation likely, further falls possible
Is House Price Stability Returning?The last couple of months have seen both the Halifax and Nationwide house price indices reporting small rises in average house prices in some areas of the UK. Does this mean that stability is returning to the housing market and the prices have reached a bottom? Some companies would have us believe that this is true. House builder Taylor Wimpey, for example, has reported a 73% increase in forward orders since the end of 2008. It also reports a fall in cancellations. However, this must be looked at in context – orders were at record lows at the end of 2008 and cancellations were probably at their highest levels ever.
Is the Mortgage Market Holding Back House Prices?One popular theory amongst estate agents and others people involved in the property market is that restricted mortgage lending is holding back growth in house prices. The problem, in reality, is that mortgage lending got out of hand and funded excessive house prices – if 90%-100% mortgage loans hadn’t existed, house price rises would have been slowed sooner and might not have fallen so much. Now that mortgage lending is more sensible again, there is a misbalance between available mortgages and house prices. House prices will have to fall until they are inline with mortgage lending. In the long term this is a good thing as first time buyers will be able to afford to enter the housing market again. In the short term
this means that many people will struggle to remortgage their homes
and may well be in negative equity for a period of time. PREVIOUS UK HOUSE PRICE FORECASTS
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