| UK
Interest Rate: 5.75%
UK
Interest Rates Forecast: Increase to 6% still possible
later this year
Case
for Further Interest Rate Rises Uncertain
A
combination of events and news this week has led to
some uncertainty as to the likelihood of interest
rates rising to 6% this year.
Previously
considered all but certain, turbulence on the stock
markets, a weakening in the pound and lower than expected
inflation figures have introduced some doubt as to the
direction the MPC will choose to take.
Inflation
news in particular has created an unclear situation.
The CPI measure of inflation fell to 1.9% in July, down
from 2.4% in June. This fall was greater than expected
but may not be significant as first thought. A large
part of the fall is due to heavy discounting in the
furniture retail market and to supermarket price cuts.
Retail
sales have actually grown considerably over the last
month, which may result in inflation stepping up again
next month or in the MPC deciding that further action
is still required to damp down longer-term inflation.
Either of these scenarios would reinforce the case for
one final interest rate rise, to 6%.
Bank
MPC Unanimous In Holding Rates
The
minutes of August's meeting of the Bank of England Monetary
Policy Committee have revealed that all nine members
were unanimous in voting for rates to be held at 5.75%
in August.
August's
vote was the first unanimous vote since May this year.
Variable
Rate Mortgages Becoming More Popular
A
new survey performed by Spicerhaart Financial Services
has found that while the vast majority of borrowers
are still choosing fixed rate mortgages, the proportion
choosing a variable rate mortgage has risen considerably
over the last month, rising from 9% to 14%.
This
suggests that these borrowers believe that interest
rates are at or near their peak - an assumption
that if correct makes variable rate mortgages better
value at present than fixed rate offerings.
|
