UK
Interest Rate: 5.25%
UK
Interest Rates Forecast: Cut to at least 5% likely later
this year
BoE
MPC Minutes Show Rate Cut Unity
The
minutes from the Bank of England's most recent MPC (Monetary
Policy Committee) meeting were published this week, providing
an insight into the thinking and voting behind this month's
0.25% interest rate cut.
The
MPC concluded that although there were short-term pressures
driving inflation up - principally food and energy prices
- these were like to moderate later in 2008, allowing
CPI inflation to fall back towards its 2% target. In order
to avoid a too-sharp reduction in demand - which might
pull inflation below its target - the MPC agreed that
an immediate cut in interest rates was
required.
All
nine members voted for a cut - but one member, David Blanchflower,
voted for a reduction of 0.5%, rather than the more modest
0.25% cut preferred by the other members.
'Mortgage
Payment Shock' Not As Bad as Expected?
Financial
journalists regularly wrote about the coming impact of
'mortgage payment shock' towards the end of 2007. This
was the supposed impact on borrowers of sudden increases
in their mortgage rates as fixed/tracker periods came
to an end.
There
was much doom and gloom over this but subsequent interest
rate cuts and a slightly more stable mortgage
market now mean that many people will only face a small
increase in their monthly payments, according to the Council
of Mortgage Lenders.
The
CML expects to see mortgage rates continue to fall this
year, meaning that by the end of the year, a homeowner
remortgaging a £114,000 repayment mortgage from
a two-year fix to a tracker could face a mortgage payment
increase of just £39 a month.
The
CML added that most people will have seen an increase
in their take-home pay since they took out their fixed
rate mortgage, helping to offset any increase in their
monthly mortgage payments.
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