| UK
Interest Rate: 5.75%
UK
Interest Rates Forecast: 5.75% is probably the peak,
but for how long is unclear
Will
Rates Rise of Fall Before 2008?
It
was not very long ago that most analysts were confident
that the Bank of England base rate would hit 6% before
the end of 2007.
The
credit crunch and more recently the Northern Rock
debacle has dented that confidence and analysts are
now divided as to the future of interest rates.
The
argument for cutting rates was given some support
this week by Andrew Sentence, a member of the rate-setting
Bank of England Monetary Policy Committee. He suggested
that "…recent changes in global financial
market conditions could weaken demand
conditions in the UK and internationally - exerting
downward pressure on inflation."
If
there were to happen then the bank could justify cutting
rates.
Conversely,
there are still strong arguments suggesting that inflation
has not been subdued. Food and oil prices continue
to rise and industrial output and retail sales from
UK businesses remain strong.
The
case for a rate cut this year seems fairly evenly
split - it's probable that the Bank of England will
leave rates unchanged for at least another month to
see how the situation stabilises - but time will tell.
Variable
Mortgage Rates Keep Rising - Fixed Staying Put
The
ongoing 'credit crunch' in the financial markets is
causing many of the UK's lenders to continue to increase
their variable and tracker rate mortgages, sometimes
by as much as 0.25%.
Variable
rate mortgages are partially funded using short-term
interbank lending, which has become very expensive
recently. It was their high dependency on this type
of lending that caused Northern Rock's problems -
and it is affecting all bank and building societies
to some extent.
Fixed
mortgage rates, on the other hand, are staying put
and in some cases being reduced slightly. The reason
this is possible is because of the different way in
which fixed rates are funded.
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