UK
Interest Rate: 5.75%
UK
Interest Rates Forecast: Rate cut expected early in 2008
Lenders
Not Passing On Rate Cuts?
Borrowers
could find that even if interest rates
do fall early next year, as expected, they won't immediately
benefit from reduced mortgage payments if they are on
their lender's standard variable rate (SVR).
While
tracker mortgages are guaranteed to follow the Bank of
England's base rate, there is no such obligation for lenders'
own variable rates. As the credit crunch continues to
expose lenders to higher borrowing costs, they are seeking
to increase their cash reserves by improving
their margins.
Maintaining
a higher margin on mortgage products is an ideal way to
do this - more than one UK lender has increased their
variable rates in recent weeks despite the Bank of England
rate remaining unchanged.
MPC
Minutes - Only Two Votes for Rate Cut
The
minutes from the November meeting of the Bank of England's
Monetary Policy Committee were published this week. They
revealed that just two MPC members - fewer than expected
- voted for a rate cut in November, with the remaining
seven voting in favour of no change.
Also
surprising was the fact that one of the two 'no' votes
came from Sir John Gieve, the Deputy Governor of the Bank
of England with responsibility for monetary stability.
He would normally have been expected to vote against a
cut - this change of view may suggest that he feels that
the economy will soon start to slow.
The
minutes did acknowledge the need for the MPC to remain
reactive, however, revealing that the committee members
agreed that "there was time to wait and see whether
... the projected slowing emerged in the data".
In
other words, they don't have enough evidence that the
economy really is slowing down yet, and they won't be
rushed into cutting rates by mortgage lenders and other
bodies with vested interests.
|
