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UK Interest Rates Forecasts and Predictions for Home and Property in the UK at 14 Dec 2007

Current UK Interest Rate: 5.5%

UK Interest Rates Forecast: Further cut likely early in 2008

Bank Cuts Rates To 5.5%

At their monthly meeting on Thursday this week, the Bank of England’s Monetary Policy Committee agreed to cut interest rates by one quarter of a percent, leaving them at 5.5%.

The rate cut had been widely-requested by businesses and some economists, but it was still far from certain whether the cut would come this month or early next year.

The 0.25% cut means that homeowners with a £100,000 variable rate mortgage should find themselves between £15 and £20 better off each month – assuming their lenders pass on the rate cut.

While at least two of Britain’s largest lenders immediately promised to cut their mortgage rates accordingly, it is not yet clear whether all lenders will do so.

Many lenders are still struggling to increase their cash reserves to protect themselves from the effects of the credit crunch. A cut in the Bank of England rate offers them the opportunity to leave their variable rate unchanged and improve their profit margins.

What Does This Mean For Me?

While it may take a little time for the impact of the rate cut to become clear, for homeowners, two things seem certain:

· The cut in rates should help the estimated 1.4 million homeowners who will be coming off fixed rates in the next year. They will have the choice of remortgaging to another fixed rate deal or transferring to their lender’s variable rate. Both of these options will have higher interest rates than their current mortgage – so any reduction in rates to lessen the impact will be extremely welcome.

· This rate cut won’t magically kick start the housing market again – and nor is it intended too. The consequences of the credit crunch have been that banks and building societies have become much more cautious in their lending – and that position is unlikely to change in the near future.


 

 


 


 




 




 


 





 














 

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