As we said earlier this month, the Bank of England's decision to hold interest rates was not an easy one, with the minutes of the Bank's Monetary Policy Committee revealing that some of the nine committee members wanted an interest rate increase to stem rising inflation.
The minutes said 'if there were a serious threat to medium-term inflation expectations then a pre-emptive rise in rates would be appropriate. Delay would only increase the eventual costs of bringing inflation back to target.'
Showing posts with label interest rates. Show all posts
Showing posts with label interest rates. Show all posts
Thursday, 19 June 2008
Wednesday, 11 June 2008
Interest Rates To Rise???
The prospect of further rate cuts this year have gone and there are likely to be two or even three quarter percent rises in interest rates this year, the City is gambling.
Having made three interest rate cuts since December, the Bank of England's efforts have been hit by rising oil costs, putting inflation up. Investors are now gambling on the prospect of rather than interest rates dropping to 4.5%, the base rate might be increased to 5.5%, or higher.
Having made three interest rate cuts since December, the Bank of England's efforts have been hit by rising oil costs, putting inflation up. Investors are now gambling on the prospect of rather than interest rates dropping to 4.5%, the base rate might be increased to 5.5%, or higher.
Saturday, 7 June 2008
Bradford & Bingley increase borrowing cost
Following the lead of the Abbey and Woolwich and then Nationwide, interest rates for mortgages have been increased by Bradford & Bingley.
They will increate rates on their standard residential, buy-to-let and self-certification mortgages by between 0.05% and 0.55%, even though the Bank of England this week kept the base interest rate at 5%.
They will increate rates on their standard residential, buy-to-let and self-certification mortgages by between 0.05% and 0.55%, even though the Bank of England this week kept the base interest rate at 5%.
Friday, 6 June 2008
Interest Rates
As expected, the Bank of England decided to keep interest rates steady at 5% this month. With inflation around 3% well ahead of their 2% target and likely to approach 4% over the summer due to rising fuel and food prices, even falling house prices could not convince the Bank to cut interest rates.
If inflation rises above 3%, Bank Governor Mervyn King has to write a second letter to Alistair Darling to explain why it is so high. King has said he expects to write a number of such letters this year following the first letter in the Bank's history when inflation hit 3.1% last year.
The British Chambers of Commerce urged the MPC to consider the whole economic outlook and not just inflation. 'We understand the critical need for the MPC to maintain credibility, but it cannot disregard the worsening threats to growth,' said the BCC's David Kern.
The European Central Bank also left interest rates at 4% as it concentrated on its own inflation battle.
If inflation rises above 3%, Bank Governor Mervyn King has to write a second letter to Alistair Darling to explain why it is so high. King has said he expects to write a number of such letters this year following the first letter in the Bank's history when inflation hit 3.1% last year.
The British Chambers of Commerce urged the MPC to consider the whole economic outlook and not just inflation. 'We understand the critical need for the MPC to maintain credibility, but it cannot disregard the worsening threats to growth,' said the BCC's David Kern.
The European Central Bank also left interest rates at 4% as it concentrated on its own inflation battle.
Tuesday, 3 June 2008
Nationwide increase mortgage costs
The Nationwide has followed the lead of Abbey and Woolwich by increasing the cost of its fixed rate mortgages. Its top two-year fixed rate for homebuyers has jumped by over quarter of a percent from 5.95% to 6.25%, with a £599 arrangement fee - leaving it just 0.24% below its 6.49% base mortgage rate. Whilst the fee-free two-year fixed rate has also risen by 0.3% to 6.65%, and the best two-year fixed rate for remortgagers is now 6.45%, with a £599 fee.
Nationwide said that a significant rise in money market swap rates over the past few weeks had led it to reverse cuts made to its mortgage rates in May.
Nationwide said that a significant rise in money market swap rates over the past few weeks had led it to reverse cuts made to its mortgage rates in May.
Monday, 2 June 2008
Interest Rates Up.
In the light of a difficult decision for the Bank of England, two of the country's main lenders have already preempted what might happen.
The Abbey and Woolwich have both raised the costs of their new fixed rate mortgages, with other lenders now expected to follow this move.
Abbey has increased the price of all its fixed-rate products by between 0.15% and 0.56%. Abbey cut its fixed rates just two weeks ago.
Woolwich increased its two-year fixed-rate deal from 5.49% to 6.19% while its ten-year fixed rate product went from 5.59% to 5.77%.
Both banks are blaming last week's increase in swap rates - the level at which banks lend to each other - for the increase. They also say they want to control business volumes in a volatile market.
The Abbey and Woolwich have both raised the costs of their new fixed rate mortgages, with other lenders now expected to follow this move.
Abbey has increased the price of all its fixed-rate products by between 0.15% and 0.56%. Abbey cut its fixed rates just two weeks ago.
Woolwich increased its two-year fixed-rate deal from 5.49% to 6.19% while its ten-year fixed rate product went from 5.59% to 5.77%.
Both banks are blaming last week's increase in swap rates - the level at which banks lend to each other - for the increase. They also say they want to control business volumes in a volatile market.
Hobson's Choice For Bank
The Bank of England's monetry committee will have a difficult meeting this week when it meets to decide what will happen with interest rates this month, and the experts are divided as to what might happen.
On one side, the plunge in the housing market is calling for interest rates to be cut to ease the burden on mortgage payers and get some movement back into the property market.
On the other side, the rising cost of fuel and food is putting inflation up, well over the Bank's target of 2% to it's limit of 3%, with this month's figures yet to be released. This is seen as an indicator to increase interest rates, good news for those with savings.
Normally the rising inflation would automatically trigger an interest rate rise, but inflation is rising due to the increase in the cost of essentials, which would not be controlled by interest rises.
Whichever way the Bank of England reacts it will no doubt be seen to be doing the wrong thing. Either it will be punishing hard pressed people who have borrowed too much; it will be not looking after the economy and allowing inflation to spiral; or it will be sitting on the fence dithering!
Watch this space on Thursday!
On one side, the plunge in the housing market is calling for interest rates to be cut to ease the burden on mortgage payers and get some movement back into the property market.
On the other side, the rising cost of fuel and food is putting inflation up, well over the Bank's target of 2% to it's limit of 3%, with this month's figures yet to be released. This is seen as an indicator to increase interest rates, good news for those with savings.
Normally the rising inflation would automatically trigger an interest rate rise, but inflation is rising due to the increase in the cost of essentials, which would not be controlled by interest rises.
Whichever way the Bank of England reacts it will no doubt be seen to be doing the wrong thing. Either it will be punishing hard pressed people who have borrowed too much; it will be not looking after the economy and allowing inflation to spiral; or it will be sitting on the fence dithering!
Watch this space on Thursday!
Wednesday, 14 May 2008
Surge in inflation
A massive surge in inflation has been reported from 2.5% to 3% caused by rising gas & electricity bills and food prices and Budget tax increases on alcohol and tobacco. Although only just released, the Bank of England's monetary policy committee did have access to this data when it met last week and decided to hold interest rates. The committee's aim to to keep inflation around 2% and never allow it to creep above 3%. City economists had been expecting a report of 2.6%.
The result of this is that another rate cut is highly unlikely. Back in October when inflation crept to 2.1% analysts thought it unlikely that there would be any further base cuts before spring.
When they next meet, the monetary policy committee will have to work out how to balance rising inflation against the reports from RICS yesterday of a record low in house sales.
Savers who are watching their savings dwindle in the face of increasing inflation will be hoping that the next rate announcement will be for a rate rise, but there is no guarantee that a rise in interest rates would have any effec on high street prices.
The result of this is that another rate cut is highly unlikely. Back in October when inflation crept to 2.1% analysts thought it unlikely that there would be any further base cuts before spring.
When they next meet, the monetary policy committee will have to work out how to balance rising inflation against the reports from RICS yesterday of a record low in house sales.
Savers who are watching their savings dwindle in the face of increasing inflation will be hoping that the next rate announcement will be for a rate rise, but there is no guarantee that a rise in interest rates would have any effec on high street prices.
Monday, 12 May 2008
June rate cut in doubt
The City was expecting the Bank of England to cut interest rates from 5% to 4.75% next month, having left them unchanged last week. But the price of goods leaving British factories in April up 7.5% over the last 12 months, the fastest rate of price growth since records began in 1986. It came as manufacturers faced a record 23.3% jump in input costs, with crude rising more than 60%, food over 30% and fuel more than 20%.
City economists described the figures as 'appalling' and 'truly horrible' for the Bank of England. This is likely to drive the official rate of inflation over the Bank's 2% target, possibly even breaking 3% and remaining there. This will limit how much the Bank of England can reduce interest rates.
Howard Archer of Global Insight said: 'The April producer price data are truly horrible and very worrying indeed for the Bank of England.
'It highlights why the Bank was unwilling to enact a back-to-back interest rate cut last week, and raises serious questions as to whether the Bank will be willing to cut interest rates from 5% to 4.75% as soon as June, despite current signs that the economic downturn may be deepening and widening.
'For now at least, we still expect the Bank to act in June, but it is by no means a gimme.'
City economists described the figures as 'appalling' and 'truly horrible' for the Bank of England. This is likely to drive the official rate of inflation over the Bank's 2% target, possibly even breaking 3% and remaining there. This will limit how much the Bank of England can reduce interest rates.
Howard Archer of Global Insight said: 'The April producer price data are truly horrible and very worrying indeed for the Bank of England.
'It highlights why the Bank was unwilling to enact a back-to-back interest rate cut last week, and raises serious questions as to whether the Bank will be willing to cut interest rates from 5% to 4.75% as soon as June, despite current signs that the economic downturn may be deepening and widening.
'For now at least, we still expect the Bank to act in June, but it is by no means a gimme.'
Thursday, 8 May 2008
Interest Rates On Hold
The Bank of England has, as predicted on Monday, announced that it will hold interest rates this month, following last month's rate cut to 5%. There was intenst pressure for the rate to be cut another 0.25% to 4.75%, but the monetary committee were concerned over the threat of rising inflation.
Whereas this is good news for savers, householders with mortgages will be disappointed that there is not another potential cut in their repayments.
At the same time, the European Central Bank kept interest rates at 4% to counter its worries about inflation on the Continent.
Experts are predicting a cut next month, with mixed views as to har far the cuts will continue this year - possibly taking the base rate down to 4.5% or even 4% by the end of the year, with the most optomistic expecting further cuts to 3.75% over the next 9 months.
Whereas this is good news for savers, householders with mortgages will be disappointed that there is not another potential cut in their repayments.
At the same time, the European Central Bank kept interest rates at 4% to counter its worries about inflation on the Continent.
Experts are predicting a cut next month, with mixed views as to har far the cuts will continue this year - possibly taking the base rate down to 4.5% or even 4% by the end of the year, with the most optomistic expecting further cuts to 3.75% over the next 9 months.
Monday, 5 May 2008
No interest rate cut???
Following last month's rate cut where the banks did not all follow suit, is expected that the Bank of England will not cut rates this week. This is because Sterling is falling on the currency markets:
'Sterling represents one of the inflation risks,' said George Buckley, chief UK economist at Deutsche Bank.
'We have seen a long period of lower prices thanks to cheap imports and a strong pound. That is now coming to an end.'
As Sterling weakens, the pound buys less an dputs the price of imported goods up, increasing inflation. But some economists do predict a rate cut, saying that it will come soon, so why not sooner than later?
'Sterling represents one of the inflation risks,' said George Buckley, chief UK economist at Deutsche Bank.
'We have seen a long period of lower prices thanks to cheap imports and a strong pound. That is now coming to an end.'
As Sterling weakens, the pound buys less an dputs the price of imported goods up, increasing inflation. But some economists do predict a rate cut, saying that it will come soon, so why not sooner than later?
Wednesday, 16 April 2008
Halifax Raises Mortgage Rates
The Halifax has made it's second round of mortgage rate rises in just 9 days, less than a week after the Bank of England dropped interest rates.
These increases add more than £1,000 repayments to a typical £158,100 home loan. Popular deals such as the 2 year fixed rate and a number of tracker mortgages will rise by 0.5%. The 2 year fixed deal was set at 5.72% 2 weeks ago for those with 10% deposits. This was increased to 6.09% last week and again to 6.59% from today.
The Alliance & Leicester also raised rates twice last week - with a fixed rate mortgage going from 4.99% to 5.74% in just three days - the same time as the base rate cut.
These increases add more than £1,000 repayments to a typical £158,100 home loan. Popular deals such as the 2 year fixed rate and a number of tracker mortgages will rise by 0.5%. The 2 year fixed deal was set at 5.72% 2 weeks ago for those with 10% deposits. This was increased to 6.09% last week and again to 6.59% from today.
The Alliance & Leicester also raised rates twice last week - with a fixed rate mortgage going from 4.99% to 5.74% in just three days - the same time as the base rate cut.
Thursday, 10 April 2008
Interest Down, Mortgages Up
Hours before the widley anticpated move by the Bank of England to lower interest rates to 5% (down .25% from 5.25%) two leading banks raised interest rates on their mortgage products.
Nationwide building society and Alliance & Leicester increased the cost for their borrowers as the Bank of England tried to lower rates to protect the UK economy, undermining the Bank of England's control on Mortgage rates. Although the Nationwide did also reduce the rate on some of it's mortgages today as well.
Tim Fletcher of financial analysts Baseline Capital said: 'Today's decision is irrelevant as far as pricing for mortgage borrowers is concerned.
'The Bank has effectively lost control of retail interest rates, which have become decoupled from the base rate.
'Any change in the Base Rate is likely to have little or no impact on the cost of raising funds for lenders.
'Together with the need to control demand this cost will continue to dominate retail lenders' pricing decisions.'
Such moves could leave a lot of people suffering twice after today - with banks not passing on rate cuts, or even increasing rates, for mortgages whilst others will reduce interest paid on savings accounts.
Nationwide building society and Alliance & Leicester increased the cost for their borrowers as the Bank of England tried to lower rates to protect the UK economy, undermining the Bank of England's control on Mortgage rates. Although the Nationwide did also reduce the rate on some of it's mortgages today as well.
Tim Fletcher of financial analysts Baseline Capital said: 'Today's decision is irrelevant as far as pricing for mortgage borrowers is concerned.
'The Bank has effectively lost control of retail interest rates, which have become decoupled from the base rate.
'Any change in the Base Rate is likely to have little or no impact on the cost of raising funds for lenders.
'Together with the need to control demand this cost will continue to dominate retail lenders' pricing decisions.'
Such moves could leave a lot of people suffering twice after today - with banks not passing on rate cuts, or even increasing rates, for mortgages whilst others will reduce interest paid on savings accounts.
Rate Cut Predicted
The Bank of England is expected to drop interest rates by 0.25% today. This expectation led to the Pound hitting a record low of 80 pence to the Euro yesterday - a fall of around 20% in just 6 months.
Monday, 7 April 2008
No More 100% Mortgages
Abbey, the last lender still offering 100% mortgages, how now bowed to the current financial situation and removed it's 100% mortgage products.
It is now not possible to get a 100% motgage, making it harder for first time buyers to step onto the property ladder. Money experts are now saying that owning a home is a luxury, not a right, and suggest that young couples and first time buyers should take close stock of their finances before taking the huge risk of buying.
It is now not possible to get a 100% motgage, making it harder for first time buyers to step onto the property ladder. Money experts are now saying that owning a home is a luxury, not a right, and suggest that young couples and first time buyers should take close stock of their finances before taking the huge risk of buying.
Friday, 28 March 2008
Nationwide Increases Mortgage Costs
Although the base rate was not changed this month, the Nationwide Building Society has put up it's lending charges. Rates for two-year trackers have increased by 0.57% and average fixed rate mortgages have gone up by 0.2%.
Matthew Carter, Nationwide's director of mortgages, said: 'Nationwide sympathises with anyone who is concerned about the availability of affordable mortgages. We continue to offer our customers a wide range of fixed and variable rate mortgages up to 95% loan to value with, as always, a focus on prudent and responsible lending rather than volume.'
Matthew Carter, Nationwide's director of mortgages, said: 'Nationwide sympathises with anyone who is concerned about the availability of affordable mortgages. We continue to offer our customers a wide range of fixed and variable rate mortgages up to 95% loan to value with, as always, a focus on prudent and responsible lending rather than volume.'
Thursday, 6 March 2008
No Rate Cut
The Bank of England has announced that rates will remain steady this month. Whilst good news for savers, holding mortgage rates at the current position will continue to be painful for mortgage borrowers and others with outstanding debts.
On the back of this news, the pound rose against the dollar, breaking the $2 mark for the first time in 2008.
On the back of this news, the pound rose against the dollar, breaking the $2 mark for the first time in 2008.
Tuesday, 4 March 2008
FSA Mortgage Shock Warning
The Financial Services Authority has reported concerns that as many as 20% of mortgage payers could be struggling with payments over the next 12 months, yet many have no plans for how to cope. The concerns centre around mortgage payers who may recieve a 'rate shock' when existing fixed deals come to an end.
It has launched a £2m advertising campaign to help raise awareness about shopping around before deals come to an end. It has published a checklist of steps on it's website for homeowners, as it is feared that 1.4million mortgage payers could be hit by by monthly rises in mortgage repayments of up to 25%.
Impartial mortgage rate tables are available on many websites, whether you want to view possible changes or plan a new mortgage. There are still many good fixed rate mortgage deals to be had, as well as trackers, discounted and all of the usual variations.
It has launched a £2m advertising campaign to help raise awareness about shopping around before deals come to an end. It has published a checklist of steps on it's website for homeowners, as it is feared that 1.4million mortgage payers could be hit by by monthly rises in mortgage repayments of up to 25%.
Impartial mortgage rate tables are available on many websites, whether you want to view possible changes or plan a new mortgage. There are still many good fixed rate mortgage deals to be had, as well as trackers, discounted and all of the usual variations.
Thursday, 28 February 2008
More Interest Rate Cuts On Way??
'Growth is slowing quite sharply now, in part because of the rises in interest rates last year. That in itself might justify a progressive shift in policy from a restrictive to a more neutral stance,' reported Sir John Gieve, Deputy Governor of the Bank of England.
A neutral cost of borrowing is seen by many as 5%, which would mean a further 0.5% cut in interest rates. But he warned that inflation is still playing a worrying part in the current interest rates, due to the cost of food and fuel.
A neutral cost of borrowing is seen by many as 5%, which would mean a further 0.5% cut in interest rates. But he warned that inflation is still playing a worrying part in the current interest rates, due to the cost of food and fuel.
Friday, 22 February 2008
Northern Rock Ends 125% Mortgages
Northern Rock has followed other lenders and yesterday withdrew it's 125% mortgages. It will no longer offer this mortgage to new customers as it concentrates it's lending on low-risk customers and attempts to shrink it's book.
Many of the better quality loans in it's books are owned by another company, Granite, and are not part of the Nationalisation process. This along with customers who can moving away, leaves the bank with a poorer quality mortgage book for nationalisation.
Analysts are also worried about customers across the board with 100%+ mortgages where the deals are coming to an end shortly. Many of these will not be able to find new offers and could end up struggling to meet repayments. Only Birmingham Midshires still offers a 125% mortgage, and this is expected to be withdrawn.
Many of the better quality loans in it's books are owned by another company, Granite, and are not part of the Nationalisation process. This along with customers who can moving away, leaves the bank with a poorer quality mortgage book for nationalisation.
Analysts are also worried about customers across the board with 100%+ mortgages where the deals are coming to an end shortly. Many of these will not be able to find new offers and could end up struggling to meet repayments. Only Birmingham Midshires still offers a 125% mortgage, and this is expected to be withdrawn.
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