Interest rates uk

Future of Interest Rates in UK and UK Interest Rate History The latest date from the Office of national statistics shows that prices rose less than expected in the previous month. The CPI measure of inflation remained at 2.4%. The RPI (which includes housing costs) rose to 3.7%. However this was less than expected and in the Bank’s latest inflation report they reduced their inflation forecasts for next year to “around 2%” for the middle of next year. The reasons for offering a lower inflation forecast is due to a number of reasons. Firstly oil prices have fallen,by 23% since August, due to increased supply from OPEC. This feeds through into lower transport costs. Also Unemployment continues to edge up, it is now 1.7 million up by 27,000 on the previous month. With rising unemployment levels it is likely that wage rises will be moderated. However the Bank did mention a note of caution. They said with regard to the labour market it is hard to predict future wage inflation because of unreliable data collection. For example they mention that it is difficult to calculate how many eastern European workers are entering the country. If there are more migrants than measured it will help to keep wage inflation low. However despite difficulties with some statistic many economists are now predicting the UK economic cycle has peaked and the future trend of interest rates may be downward. However there is still the possibility interest rates may continue to rise in the future. Firstly CPI inflation is still forecast to rise to 2.7% in the next couple of months. Also the levels of borrowing continue to reach all time highs. This is illustrated through the rapid growth in M4 (broad measure of inflation.) Although money supply is often an unreliable guide to inflation there is evidence that money supply growth of 14% may cause inflationary pressures in the future. With recent talk of 125% mortgages the Bank’s governor Mr King said that “Some people had taken on far more credit than it was ever plausible to repay” He went on to say it was a real social problem but not one that would directly affect interest decisions. In addition to high levels of consumer borrowing the ever resilient housing market still provides ammunition for inflation hawks. With house prices continue to rise this could be a continued source of higher consumer spending and possibly inflation. Overall the report is good news for those home owners who are worried about rapidly rising interest rates. The most likely scenario is only a very small future rise in interest rates. Richard is an economics teacher in Oxford. Richard has written many articles on economics and the UK housing market. He edits a website on guide to UK Mortgages This offers advice on different types of mortgages and the latest movements in UK housing market http://www.mortgageguideuk.co.uk/ http://www.mortgageguideuk.co.uk/mortgages/index.html Predicting the future is always a difficult task, particularly when it comes to economics. UK interest rates are a source of concern for many of us - does the past give us any hints as to the future? Interest rates are one of the major factors that influence the economy. In the case of most of us, it is often their impact on the housing market that causes the most interest. The fifth consecutive rise in the Bank of England's base rate left interest rates standing at 5.75% by the summer of 2007. With signs of the housing market slowing, many home owners were expectant of a drop in interest rates. Many saw interest rates as being relatively high and this was certainly the case when compared to a short period in the months before 2007. Less than a year earlier interest rates had stood at just 4.5%. But were interest rates really all that high? Historical evidence suggests that we'd rarely had it so good. Back in 1989, with the housing market in trouble, the interest rate stood at a seemingly incredible 15%, with mortgage rates often being above that level. In that context, the interest rates of 2007 seem pretty low. Big drops in the base rate weren't seen until 1992 and 1993. At the beginning of 1992 the UK base rate stood at some 10.5%. By the end of 1993 it had fallen to 5.5%. That dramatic drop was seen in some exceptional circumstance but it should stand as a warning to many home owners. Interest rates can move quickly, leading to significant changes in our mortgage repayments. Interest rates now stand at their highest level in six years and yet we have seen that they are still relatively low by historic levels. We're not talking about ancient history here either - we're looking at levels within our lifetimes for most of us. The future of interest rates will be interesting to watch but it's importance that we don't base our financial decisions on assumptions about the future direction of rates. History tells us that interest rates can vary rapidly. Keith Barrett has written for Finance Facts about uk interest rate predictions and other personal finance issues. This article may be used by any website publisher, though this resource box must always be included in full. http://www.financefacts.co.uk/