UK Property Market Forecast and Previous Interest Rate Forecasts and Predictions at 31 8 2007

UK Interest Rates Forecasts and Predictions for Home and Property in the UK at 31 8 2007

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Several bad credit mortgage lenders have temporarily withdrawn their mortgage ranges while they consider their position and it looks likely that interest rates will rise on such products to reflect their greater cost to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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