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UK Interest Rate: 5.25%
UK
Interest Rates Forecast: Increase in rates virtually
certain in May
Lenders
Pulling Cheap Fixed Rate Mortgages
Many
of Britain's largest mortgage lenders have been withdrawing
their fixed rate mortgages from sale and replacing them
with more expensive mortgage policies, in expectation
of an increase in the Bank of England's
base rate next month.
Lenders
such as Alliance & Leicester, Halifax, Portman and
Skipton have all withdrawn most of their fixed rate
mortgages, with other lenders putting them on "withdrawal
watch" – meaning that they could be withdrawn
at just a few hours notice.
The
move comes as a result of the widespread expectation
of a further interest rate rise in
May, following continued rises to inflation.
Interest
Rate Rise Could Double Repossessions
A
rise in interest rates could lead to
the number of home repossessions doubling, according
to an independent report published by Business Strategies,
the economic consulting arm of credit reference agency
Experian.
Two
measures of financial stress were used to perform the
research – the average write-off levels of unsecured
debt, and the number of mortgage repossessions. These
were combined with four different interest rate scenarios
to determine the effect interest rate decisions will
have on repossessions.
In
the most likely scenario, that of a 0.25 per cent rise
in interest rates in May, write-offs of unsecured debt
would reach 4.3 per cent – the highest level since
1992. Mortgage repossessions would rise to 42,700 –
more than double the number in 2006.
This
research highlights just how tightly-stretched many
households' finances are, and suggests that even if
interest rates fall in 2008, repossessions
may continue to rise for some time.
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