UK Interest Rate: 5.00%

UK Interest Rates Forecast: Possible cut to 4.75% in June

MPC Minutes Show Wide Divide In April

For the first time in nearly two years, the members of the Bank of England's Monetary Policy Committee were split three ways when it came to the vote on April's interest rate decisions.

The minutes of the April MPC meeting, published this week, show that six members supported a 0.25% cut, with two members preferring to leave the rate unchanged and one member proposing a 0.5% cut.

This lack of consensus does perhaps make a rate cut in May more unlikely - although many analysts expect to see a cut in June.

Bank of England 'Rescues' Mortgage Lenders - Will Rates Fall?

This week has seen the widely-publicised announcement of a new loan mechanism to help banks start lending money to each other again. Banks will be able to swap their mortgage loans for government bonds, against which they will be able to borrow more easily.

The technicalities seem reasonable - and thankfully the tax payer won't be taking all the risk away from the banks - but the question on everyone's lips is 'will mortgage rates fall as a result?'

Unfortunately, the answer, at least in the short term, seems likely to be no.

Even if the Bank of England's actions help ease money lending between banks, mortgage rates are unlikely to fall anytime soon. There are several reasons for this:

· The likelihood of falling house prices means lenders still won't want borrowers with small deposits, as they pose too much of a negative equity risk
· For similar reasons, lenders will continue to restrict their best offers to 'prime' borrowers - those with good credit ratings and secure incomes.
· Finally, banks reduced their profit margins on mortgages to very low levels during the housing boom - now that things are slowing down, they are keen to build these margins back up again.