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UK Interest Rates Latest Update
Interest Rate Update 28/7/2010
Current UK Interest Rate: 0.5%
UK Interest Rates Forecast: Growing likelihood of continued low interest rates
New Forecast Suggests Rates Could Stay Put Until 2014
A new survey by Ernst & Young's Item Club predicts that the Bank of England base rate might stay at 0.5% until 2014.
The forecast will be welcome news for many hard-pressed homeowners who are living in fear of their mortgage rates rising. If the base rate stays low, it's highly likely that mortgage rates will remain at their current low levels, too.
Item Club chief economic adviser Peter Spencer said: "A base rate of 0.5 per cent will begin to look like the new normal. I have no doubt that if the Bank does raise rates, it will then be forced to reduce them."
The Item Club aren't the only people forecasting low rates – Douglas McWilliams, chief executive of the Centre for Economics and Business Research has said that he sees "no need to raise interest rates at all for at least the next 18 months."
The minutes of the most recent meeting of the Bank of England's Monetary Policy Committee suggest that the majority of the members of the MPC agree with this position at present. All but one member voted to leave the base rate unchanged at 0.5%, with Andrew Sentence being the lone dissenting voice supporting an increase to 0.75%.
Some Experts Still Expecting a Rise
Despite this, many economists are still expecting interest rates to rise late this year or early next year. The latest figures on growth suggest that it could soon be time to tighten monetary policy – raise interest rates, to you and me.
The official forecast is for
rate rises, too, predicting that rates will start to rise early in 2011
and will reach 3% by 2014. This would mean a gradual rise in mortgage
rates for most homeowners – except those who have taken out long-term
fixed rate deals.
PREVIOUS UK MORTGAGE INTEREST RATE FORECASTS
UK House Price Forecasts and Predictions Latest Updates
House Price Update 28/7/2010
Current UK House Prices Situation: Prices wavering in many areas of the UK
UK House Prices Forecast: Regional weakness and no overall growth in 2010
New Figures Show Prices Down 0.1%in July
New figures from property information specialist Hometrack show that average house prices in England and Wales fell by 0.1% in July – the first fall recorded by Hometrack for 15 months.
Hometrack's price index is based on a range of data gathered from estate agents each month. The average price data is based on the contributing estate agents' opinion of an achievable selling price for each of four types of property. This means that if the Hometrack index records a fall, it's because estate agents believe that the achievable sale price of the properties they are selling are falling.
In this case, Hometrack says that July's 0.1% fall is the result of increasing supply, weakening demand and homes taking longer to sale. Hometrack's director of research, Richard Donnell, believes that things will get worse: "In recent months, much of the pent-up demand which stretched back to mid-2009, has now either been satisfied or dissipated." He said that "further modest price falls are inevitable over the second half of the year."
Some of this downwards trend can be attributed to households becoming less confident in the security of their finances. With taxes set to rise and the spectre of widespread public sector job cuts, many people are anxious about the future. This is likely to impact badly on housing market confidence and will discourage some people from moving or attempting to secure a new mortgage deal.
A recent Markit/YouGov poll found that a third of households felt that their finances had worsened over the last month and nearly half those surveyed expected their financial situation to worsen over the next year.
Based on current information,
it looks like a year of no overall change is the best that can be hoped
for in the housing market.
PREVIOUS UK HOUSE PRICE FORECASTS
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