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Archive for the ‘Interest Rates’ Category

The Economy Turns

Thursday, December 6th, 2007

Property prices have dropped for the third month in a row and the bank of England is feeling the pressure to cut interest rates as trading slows this Christmas.

Jonathan Davis who spoke on behalf of House Price Crash during the BBC program predicts that properties valued at £300,000 will fall to an astonishing £200,000. Great news for first time buyers, not so great news for property developers.

The inevitable correction in the housing marking has been awaited by many trying to get on the ladder, will this finally be the crash all first time buyers have been hoping for?

Check out the video below from BBC News:

Are We Heading Towards a Recession?

Thursday, August 16th, 2007

Stocks CrashThe big question bouncing around this week is “Will the UK’s debts drag the economy into a recession?”. The average household owes almost as much as their yearly earnings now, money has been too easy to borrow and naturally the UK has taken advantage of the situation allowing for bigger and better assets and more disposable incomes.

Huge crashes in the US stock market today have affected countries all around the world, banks are likely tighten their lending habits as the level of risk continues to increase. Will interest rates rise again to dampen consumer spending even more? Will US house prices continue to fall? I can’t help but wonder, “Is this the beginning of the end?” And by that I don’t mean the end of mankind (obviously) I mean the end of the housing boom!

Clearly a recession is a less that ideal situation for the economy, but unfortunately I personally think that’s where we’re heading.

Interest Rates Hit 5.75%

Thursday, July 5th, 2007

GraphMortgages and loan repayments continue to increase throughout the UK with interest rates now risen another .25% to 5.75%. Seriously, how long can this continue for? We have already been warned that the price of flats are levelling off due to less demand, so how long can it be until the next house price crash?

Are we going to be a generation of renters, I hope not – it’s totally unfair that our generation cannot afford to buy a family home. Who wants to live in a two bed flat for the rest of their lives, I know I don’t.

Interest Rates Expected to Rise Again

Thursday, May 17th, 2007

GraphAs I watched the evening news last night I was surprised to hear that interest rates are expected to rise again in the next few months. In a recent poll 65% of the economists predicted another rise to 5.75% later in the year.

The reason so many believe it will take place is so The Bank of England can hit their 2% inflation target within the next 2 years.

However, if interest rates continue to grow at this speed what is going to happen to the housing market? We’ll have to wait and see.

Interest Rates Hit 5.5%

Thursday, May 10th, 2007

GraphToday, the Bank of England officially increased interest rates to 5.5% as predicted. Although this is the first rise since February, it has taken the cost of borrowing higher than it has been since 2001. If you are a saver then I’m sure this will be good news for you however, homeowners are likely to face higher bills and higher mortgage interest repayments.

For the average household with a 100,000 mortgage there will be an average increase of £16 extra on repayments, could this be the beginning of a crash?

Read more information at The Guardian.

Catalyst For a Crash?

Wednesday, April 25th, 2007

WalletInflation has hit 3.1% forcing the bank’s governor, Mervyn King to write a letter to the chancellor explaining why inflation has broken through the 3% level. I suppose the next question is – how high will interest rates go? With the rise in inflation it is likely that interest rates will increase further in order to discourage consumer spending and to decrease the rate of inflation. The base rate is currently set at 5.25% but it is forecasted to rise to 5.5% on 10th May when the Bank of England’s monetary policy committee is due to meet.

However, if interest rates increase by more than this there will be some unfortunate consequences; those who have taken out interest-only mortgages will be hit hard as their repayments will seem more and more unmanageable. The many buyers who opted for a fixed-rate loan may not notice a difference however if they have a short-term contract they could also face steep rises in interest repayments.

Investment bank ABN Amro predict that the base rate will in fact rise to 6% by the Autumn, they are also preparing for a possible house price crash, however many other large banks disagree.

As these minor changes occur in the economy, I also wonder if it’s all heading towards a crash. Although I know this will dampen economic growth, it may also mean I can finally buy a house :).

Further information at The Guardian.