UK Property Market Forecast and Archived Interest Rate Forecasts and Predictions at 24 8 2007

UK Interest Rates Forecasts and Predictions for Home and Property in the UK at 24 8 2007

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.

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