| UK
Interest Rate: 5.75%
UK
Interest Rates Forecast: Cuts unlikely before 2008
Barker
Dampens Rate Cut Hopes
Kate
Barker is widely considered to be one of the 'swing voters'
on the Bank of England's Monetary Policy Committee. That
means that her vote may be particularly decisive when
it comes to future interest rate decisions.
In
a speech to Southampton accountants this week, Barker
seemed to suggest that she doesn't see any immediate need
for the Bank to reduce interest rates. She stressed that
she was still in 'wait-and-see' mode, saying that "evidence
from business surveys and housing market
indicators will be an important part of my judgment over
the next few months about how far the downside risks to
the outlook [for inflation] have increased".
Ms
Barker also observed that not all of the economic developments
seen since August - when the credit crunch started - necessarily
pointed to lower inflation. She cited a weaker pound as
one example of potential inflationary pressures.
The
end result of the speech was to convince most economic
analysts that she is unlikely to vote for a reduction
in interest rates in the near future.
This lessens the chance of any such cut being passed,
increasing the likelihood that it will be 2008 before
any changes are made.
Homeowners
Don't Understand Interest Rates
While
most people understand that lower rates mean lower payments
(and vice versa), many homeowners don't have an accurate
idea of just how much changes in interest rates
will affect their monthly payments.
A
recent survey by credit rating agency Experian found that
70% of Britons don't know what effect a 0.5% increase
in interest rates would have on a £100,000 interest-only
mortgage.
The
correct answer is an increase of £40 - but 17% thought
that it would be no more than £10 - and a further
19% expected it to be at least £80.
This
lack of understanding could go some way to explain why
consumer credit conference remains extremely high, despite
rising borrowing costs and credit standards.
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