| UK
Interest Rate: 5.00%
UK
Interest Rates Forecast: Changes unlikely before February
2007 at earliest.
A
Bad Time for a Fixed Rate Mortgage?
This
year's rises in interest rates seem
to be leading to a decline in the popularity of fixed
rate mortgages – and with good reason.
The
consensus amongst most analysts is that interest
rates are likely to peak no higher than 5.25%,
and may well settle at 4.75% again before the end of
2007. This being so, getting tied into a two to five
year fixed rate deal at the moment
makes it likely that you will have to pay more interest
than necessary for the majority of your fixed rate period.
In
addition, many of the most competitive fixed rate deals
have disappeared over the last few months, as most mortgage
lenders have gradually increased their rates in line
with the Bank of England's base rate.
As
Ray Boulger, of mortgage consultants John Charcol explains,
"If you believe base rates won't go above 5.25
per cent, there is no point in buying a fixed rate now."
BoE's
Lomax Concerned Over Rate Rises
In
a recent speech, Deputy Governor of the Bank of England
Rachel Lomax, who is responsible for the Bank's monetary
policy, highlighted her concerns over the risks of raising
interest rates unnecessarily.
She
said that "taking out insurance against risks that
don't materialise [by raising interest rates] can inject
unnecessary volatility into the economy, with consequences
for jobs as well as demand."
Lomax's
position would appear to make any further increase
in interest rates look extremely unlikely in the short-medium
term, although she stressed that the purpose of the
MPC was to ensure a balanced mixture of opinions guided
interest rate decisions, and that it was natural for
its members to disagree sometimes.
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