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UK Interest Rates Forecasts and Predictions for Home and Property in the UK at 19 10 2007

UK Interest Rate: 5.75%

UK Interest Rates Forecast: A cut is likely, but probably not before 2008

Bank Governor Indicates Immediate Rate Cut Unlikely

In a speech this week to the Northern Ireland Chamber of Commerce, Bank of England Governor Mervyn King stressed that the Bank's Monetary Policy Committee was still assessing the effects of the current credit crunch and was in no rush to cut interest rates.

King emphasised that the MPC's main role was to ensure inflation met its 2% target and stressed that interest rates would not be cut simply to protect banks from the consequences of incorrectly-priced risk.

Commenting on the recent bail-out of Northern Rock and the general role of the Bank of England in such circumstances, he used the analogy of the fire service.

King observed that while fire services will put out fires started by people smoking in bed, they "do not offer free insurance for people who smoke in bed or set fire to their own house, thereby encouraging them to take risks that endanger others."

Assessing the underlying meaning of King's speech, Global Insight economist Howard Archer said that he believed interest rates would only be cut before the end of 2007 if "growth was hit severely by the credit crunch".

At present, such a severe impact seems relatively unlikely, and most analysts concurred with Archer's interpretation of Mervyn King's message.

Archer also said that he believes the Bank of England will cut interest rates to 5.25% by the middle of 2008.

Interest Rate Divide Widens

Despite the Bank of England base rate remaining unchanged again this month, savings, mortgage and loan rates continue to fluctuate across the UK.

Broadly speaking, variable loan and mortgage interest rates are continuing to rise slightly, while fixed mortgage rates and savings rates are now slipping slightly.


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