Readers Question: How Does MPC set interest rates. Yesterday, the nine members of the MPC voted to keep base interest rates unchanged at 5%. What explains their decisions to change rates? The MPC have an inflation target of CPI 2% +/- 1 set by the Government. Therefore, predictions of future inflation are the most important [...]
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Bank Cut Base Rate – February 7th
As expected, the Bank of England cut the base rate by 25 basis points to 5.25%. This cut had been widely expected, and the only question was whether it would be a cut of 25 points or 50 points. The reason for the base rate cut was Slowing demand in both the UK and global [...]
Interest Rate Cycle in UK
Amidst all the gloom surrounding the UK housing market it is worth putting current difficulties into a historical perspective. Graph Showing Mortgage Interest Rates in UK In 2008, Interest Rates are currently at 5.5% and most predictions are for UK interest rates to fall. The lowest interest rates in the UK were reached a [...]
Outlook for Interest Rates
A few months back I looked at the prospects for interest rates in the UK. Since then market conditions have increased the likelyhood of lower rates – With some commentators suggesting that base rates could fall to 4%. Whilst a 1.5% fall would represent a significant loosening of monetary policy, the prediction is based on [...]
Interest Rate Cut for UK Homeowners
With growing signs of falling UK consumer confidence, the Bank moved to cut interest rates by 0.25% from 5.75% to 5.5%. However, it is uncertain whether the interest rate cut will actually be passed onto homeowners. Due to the credit crunch, there is a real problem of a shortage of funds for mortgages. For example, [...]
Bank Forecast Interest Rate Cuts
Despite inflation surging over the 2% target for the first time since June, the Bank of England indicated that 2008 is likely to see 3 cuts in interest rates. This will bring rates down to 5%. The rise in the CPI inflation rate from 1.8% to 2.1% is primarily due to rising food and fuel [...]
Reducing mortgage interest payments
Mortgage interest payments are the biggest outgoing for most families. With a recent downturn in the economy, many households are struggling to meet their mortgage interest payments (especially those with a sub prime balloon mortgage) If you find yourself in this situation there are a few things you can do to reduce your mortgage interest [...]
Mortgage Interest Rates Explained
Mortgages are paid back over a period of 25-50 years. Monthly mortgage repayments depend upon the interest rate charged by the bank building society. Homeowners choose between variable interest rates and fixed interest rate mortgages. Variable mortgage interest rates. Most mortgages in the UK have a variable mortgage interest rate. This means that the interest [...]
Mortgage Interest rate Predictions.
UK interest rates are currently 5.75%. A few months ago, may forecast that interest rates would soon rise to 6% and possibly higher. However, recent events suggest that interest rates may have peaked already, and in the coming months interest rates could fall due to lower inflationary pressure. Reasons why interest rates are predicted to [...]
Interest Rate Changes and Risk
Why can banks increase interest rates on mortgage repayments, even though the Bank of England Base rate remains the same? This is a good question from a reader. Recently British and American mortgage lenders have been increasing the cost of their mortgages even though the Base interest rate has not changed. This is the explanation: [...]
