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UK Interest Rate: 5.25%
UK
Interest Rates Forecast: Cut to 5% thought likely in April
or May
Mortgage
Markets Reflect "Supply and Demand" - HBOS
Rising
mortgage interest rates for homeowners
are simply reflecting "the law of supply and demand"
in the mortgage market, say HBOS - owners of Halifax,
the UK's largest mortgage lender.
The
statement came as three of the UK's biggest mortgage lenders
all raised their mortgage interest rates in response to
market conditions and growing negative
sentiment about the housing market.
One
key factor is the cost of credit. The London Interbank
Offered Rate (Libor) is the interest rate
at which banks and building societies borrow from each
other. Libor is currently at 6% - 0.75% higher than the
Bank of England base rate.
The
high Libor represents the lack of funds available for
lending between financial institutions. This shortage
means that there isn't enough to meet demand - so mortgage
lenders are able to be much more selective than in recent
years, choosing only the very lowest risk new customers.
The
high Libor is also a reason that interest rates keep rising
- as lenders seek to protect and improve their margins
in anticipation of a downturn in the market.
Bank
of England Governor Says No Crash Rate Cuts
Speaking
to a parliamentary committee this week, Bank of England
Governor Mervyn King has ruled out any emergency cuts
in interest rates - unlike the US Federal Reserve which
has cut rates drastically in recent months.
Despite
King's comments, most financial institutions still expect
a further 0.25% cut to the base rate in the next couple
of months, in line with the Bank's own forecasts.
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