| UK
Interest Rate: 5.75%
UK
Interest Rates Forecast: Increasingly likely that
rates will not rise again this year
Big
Lenders Increase Rates for All Borrowers
Following
recent rises in sub-prime (bad credit) mortgage interest
rates, many of the UK's largest mainstream
lenders have also increased their variable and tracker
interest rates.
This
is a result of the rising cost of short-term credit
for banks and building societies making it more expensive
for them to fund their mortgage loans. Fixed mortgage
rates have not yet been affected in the same way because
lenders fund these loans differently.
Some
of the biggest rate increases are for those seeking
95% and 100% mortgages - typically first-time buyers.
As these mortgages have small or non-existent deposits,
they are riskier for lenders and thus are becoming
more expensive, faster.
Bank
of England Base Rate Increasingly Unlikely to Reach
6%
While
some analysts still believe that the Bank of England's
base rate will reach 6% by the end of 2007, a growing
number believe that the base rate has reached its
peak at 5.75%.
This
is partly due to the way that banks have dramatically
increased the rates at which they
lend to each other - making it unnecessary for the
Bank of England to force these rates up by increasing
the base rate.
In
a statement to parliament this week, Mervyn King,
governor of the Bank of England, said that the Bank
was in "wait and see" mode and would not
seek to cut rates without evidence of marked
economic need. This approach would also seem to suggest
that any further increases to the official interest
rate are unlikely for the foreseeable future.
Global
Insight chief economist Howard Archer believes a rate
rise is now unlikely, saying that "This [King's
statement] seems to remove any interest rate hike
to 6 per cent off the agenda for the time being."
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