| UK
Interest Rate: 5.5%
UK
Interest Rates Forecast: Likely to increase to 5.75%
in July or August
Bank
Governor Warns Borrowers
The
Governor of the Bank of England, Mervyn King, has warned
borrowers not to push themselves too close to the limits
of affordability when taking on new loans. Speaking
to the Welsh CBI he said that, "Obvious though
the point may seem, it is unwise to borrow so much that
the repayments are affordable only if interest
rates remain at their initial levels."
He
also discussed his ongoing concerns over upside risks
to inflation, observing that although inflation has
fallen slightly, there remain a number of "elevated"
risks. King said that if these risks persist, the Monetary
Policy Committee may well "need to take further
action" - in other words, raise interest rates
again.
A
further increase in rates to 5.75%
is widely expected by economists and the stock market
and many observers believe that rates will hit 6% by
the end of 2007.
Remortgages
Up As Higher Rates Bite
Higher
interest rates have resulted in a dramatic
increase in remortgage activity, according to new data
from Spicerhaart Financial Services. The company reported
a 50% increase in the number of remortgages in May,
with remortgaging accounting for 28% of the mortgage
market in May - up from 18% in April.
Many
borrowers are opting for fixed-rate mortgage deals as
the cost of higher interest rates starts to affect their
household finances. Stephen Cox of Spicerhaart said
that further increases to interest rates
would be likely to do serious damage to the mortgage
market.
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