| UK
Interest Rate: 5.75%
UK
Interest Rates Forecast: Reducing likelihood of rates
hitting 6% later this year
Bank
of England Holds Rates At 5.75%
Following
Thursday's meeting of the Monetary Policy Committee,
the Bank of England announced that interest
rates would remain unchanged for September.
While
the decision was unsurprising, the fact that an explanatory
statement accompanied it was a surprise. The Bank
apparently felt the need to provide additional reassurance
that it would consider market conditions
when making future interest rate decisions:
"It
is too soon to tell how far the disruption in financial
markets will impair the availability of credit to
companies and households."
In
the ten years since Gordon Brown gave independence
to the Bank, it is only the third time that the MPC
have made a statement following a 'no-change' decision.
Both previous times, it has been a prelude to a rate
cut in the following month.
Analysts
say that this is far from a foregone conclusion in
this case, noting that the Bank's statement did not
explicitly hint at the direction of future rate movements
as it has done in the past.
Several
economists noted that the rise in inter-bank lending
rates had made further rises to interest rates
redundant. Andrew McLaughlin, RBS chief economist
noted that "Borrowing costs have risen without
any change in the Bank rate. This makes further Bank
rate increases much less likely…"
Rate
Rises Not Being Passed Through To Borrowers
Despite
widespread concern over the effect of rising interest
rates on mortgage holders, it appears that
many mainstream mortgage lenders have not actually
passed the whole of these increases on to their mortgage
customers.
In
the Bank of England's mortgage rate report for July,
the Bank noted that although the base rate had risen
by 1.25% since July 2006, fixed mortgage rates had
risen on average by only 0.59%.
While
this could be good news for borrowers, it does not
take into account the general trend of rising mortgage
fees, which many lenders appear to have been using
to subsidise attractive headline interest rates for
their fixed rate mortgages.
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