| UK
Interest Rate: 5.75%
UK
Interest Rates Forecast: Increase to 6% more likely
than not later this year
Uncertainty
the Only Certainty?
Turmoil
on the stock markets, wavering house prices, tightening
mortgage lending criteria and strong retail and industrial
figures can only mean one thing for the Bank of England.
Uncertainty.
The
Monetary Policy Committee's official position on interest
rates at the moment is that it has "no
firm view" on potential increases (or decreases).
That's
hardly surprising, given the events of the last few
weeks. However, homeowners and savers should not yet
discount the possibility of a further rise to 6% -
considered almost a certainty just a few weeks ago.
Analysts
are presently divided on the likelihood of further
rate rises, hovering just above or below 50%.
Alan
Clarke, economist at BNP Paribas, estimated that the
chances of another UK interest rate
increase were below 50% and commented that "In
the space of the last two weeks, the outlook for UK
monetary policy has witnessed something of a handbrake
turn."
Matthew
Sharratt, an analyst at the Bank of America, took
the opposite view, saying that the odds of an increase
to 6% by the end of 2007 were still slightly in favour
(of an increase).
Mortgage
Rates May Rise Even If BoE Rates Don't
It
is looking increasingly likely that mortgage interest
rates will rise for some borrowers - even
if the Bank of England opts not to increase their
rates. The reason for this is an increased in the
cost of credit for lenders and a tightening of mortgage
lending criteria.
These
changes will particularly impact anyone seeking a
sub-prime - or bad credit - mortgage. Mortgages of
this type account for around 10% of the UK mortgage
market.
Several
bad credit mortgage lenders have temporarily withdrawn
their mortgage ranges while they consider their position
and it looks likely that interest rates
will rise on such products to reflect their greater
cost to lenders.
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