Old UK Interest Rates Forecasts and Predictions for Home and Property in the UK to 17 12 06

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UK Interest Rates Forecasts and Predictions for Home and Property in the UK at 17th December2006

UK Interest Rate: 5.00%

UK Interest Rates Forecast: 50% probability of a further increase in February '07

Interest Rates Unchanged in December

The Bank of England opted not to raise interest rates in December, a decision widely expected by the financial community. Any change in interest rates is now unlikely before February 2007, and analysts remain divided over the probability of an increase at that time.

Other factors reducing the likelihood of a rise in rates are the continued strength of the pound against the dollar, which may help weaken import prices, and rising unemployment. Weaker import prices should help to reduce inflation, avoiding the necessity for further rate rises.

Industrial Output Weakens

For the first time in more than a year, industrial output contracted in October, with a recorded drop in output by production industries of 0.8%, according to Office for National Statistics (ONS) figures for the month. The ONS three-month trend figures supported this result, showing an overall 0.2% drop for the three months from August – October 2006.

This suggested that some of Britain's exporters are struggling to remain competitive against a weak dollar, and raised concerns that any further rises in interest rates could cause serious problems.

Mortgage Lenders Raise Interest Rates and Fees

As expected, the majority of mortgage lenders have now increased their standard variable rates in the wake of the Bank of England's base rate increase in November. However, some lenders have also increased some of their mortgage fees in an apparent attempt to subsidise more competitive headline interest rates and attract new lenders.

November saw eleven major lenders, including Abbey, Nationwide and Northern Rock increase various fees, including:

· Switching from fixed fees to percentage-based fees
· Increasing arrangement fees by up to £200
· Adding fees to products that used to be free.

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UK Interest Rates Forecasts and Predictions for Home and Property in the UK at 17th December2006

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