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UK Interest Rates Forecasts and Predictions for Home and Property in the UK at 30 11 2007

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.


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