| UK
Interest Rate: 5.00%
UK
Interest Rates Forecast: No changes for 3-6 months
Lenders
Increase Rates Following Bank of England Hike
At
least two major high street lenders have already increased
their standard variable rates of interest
following the Bank of England's base rate increase last
week. Halifax increased its standard variable rate to
7%, and Nationwide increased its basic
rate to 6.49%. Other lenders look set to follow over
the next few weeks.
Bank
of England Reduces Inflation Forecast
In
a sign that further increases to the base interest
rate may not be necessary, the Bank of England
released updated inflation forecasts this week which
suggest that maintaining interest rates at 5% should
be sufficient to cause the Consumer Price Index (CPI),
one of two key measures of inflation, to gradually fall
back to its 2% target.
Bank
of England Governor, Mervyn King, commented that the
outlook was "broadly balanced" and that the
two remaining risks to inflation were wage growth and
increased profit margins [for oil companies] resulting
from the recent falls in oil prices not being fully
passed on to consumers.
This
forecast was supported by new inflation figures released
by National Statistics which showed that despite forecasts,
the CPI measure of inflation had remained at 2.4% from
September to October. It was expected to rise to 2.6%
on the back of increases in university
tuition fees, but falling petrol prices prevented this.
Banks
Profit from .99 Syndrome
It
seems that just like supermarkets, financial institutions
have been profiting from their customers tendency to
round prices down, not up.
New
research published by Moneyfacts.co.uk showed that for
many years, banks and building societies have been charging
higher borrowing rates than many lenders recognise.
Rather like supermarkets pricing goods at £1.99
instead of £2, lenders will set interest
rates at 5.95%, rather than 6%, for example,
relying on peoples' tendency to focus on the part of
the number before the decimal place.
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