No change in UK interest rates

Following the August Monetary Policy Committee Meeting the Bank of England has announced that the base interest rate is once again to remain on hold at its lowest level in the history of the Bank of England. The base rate has been at its all time low of just 0.5 percent for well over two years now, which has provided relief for many homeowners and borrowers who have seen their monthly repayments plummet.

Economists have now predicted that the base rate will remain at this record low for the remainder of this year, with some even going as far as to say that it could remain at 0.5 percent next year as well. In a poll that included 32 economists the majority believed that it would be next year before the base rate was increased and a handful said that it could be 2013 before rates increased.

The news that the base rate is to remain on hold comes as no surprise to most industry experts, as the MPC is reacting to the fragile economy by keeping the base rate low. There will be many people that welcome the decision to keep rates low, such as those with mortgages on variable rates. However, there are also some groups that want to see rates increased in order to try and bring inflation levels down.

One group said that rather than increasing the base rate the MPC could look at further increasing the quantitative easing scheme, as this would increase the amount of money available to companies.

David Kern, chief economist at the British Chambers of Commerce, said: “Every effort must be made to sustain the recovery. If the economy weakens further, the MPC should not hesitate to increase the QE programme.”

Tags: rates, inflation, chief economist, bank of england, history, time

Interest rates stay at all time low

The base rate is to stay on hold at its record low level of 0.5 percent for another month, following the announcement from the Bank of England after the March Monetary Policy Committee meeting. The base rate was lowered to the all time of 0.5 percent in March 2008 when the Labour party was still in power, and with the recession taking its toll on the economy has remained at this level ever since.

In the run up to the latest MPC meeting some industry officials believed that the MPC would increase the base rate because of the soaring rate of inflation. The government’s target for inflation is just 2 percent by the rate of inflation has now soared to double this at 4 percent. Increasing interest rates would help to bring the rate of inflation down, hence the MPC had been under increasing pressure to increase the interest rate.

Whilst many people were calling for a base rate increase in order to try and keep a lid on inflation there will also be many people that are relieved that the base interest rate has been kept on hold, especially homeowners with variable rate mortgages. This means that they can enjoy one more month of avoiding increases in their monthly repayments.

Speculation has already arisen about when the base rate will now be increased, with some believing that it will be later on in the year. However, one official said that it can depend on a lot of things including the mood of the MPC.

He said: ‘It is possible that, despite today’s vote to leave policy unchanged, the hawks gained the support of another member. Accordingly, a rate rise within the next few months would hardly come as a shock. But raising rates now would just mean that it will take even longer for them to get back to “normal” levels. If rates do rise, I expect the move to be a small one – and if I am right about the economic outlook, even this might later be reversed.’

Tags: homeowners, government, target, order, Business Finance, record low level

Rising unemployment sparks debt fears

Increases in unemployment levels seen in the final quarter of last year have sparked concerns about rising repossessions and spiralling debt problems according to recent reports. Personal debt levels in the UK have been causing concern for the past few years, with the recession, global credit crisis, and difficult financial climate highlighting the debt problems that many people were experiencing.                                                                     

It has been revealed recently that the level of unemployment in the UK soared in the last three months of last year, with the figure increasing by 44,000 taking the total number of unemployed to nearly 2.5 million. Many of those affected by unemployment are younger people. Concerns have now increased with regards to how the rising level of unemployment will affect people that have debts that they are already struggling with and those that have a mortgage to pay.

In addition to this the strong possibility of interest rate rises this year will also impact upon the ability of consumers to pay both their mortgages or rent and their other debts such as credit cards, loans, and other forms of finance. It is thought that the base interest rate, which has been at an all time low of just 0.5 percent for the past twenty two months, will soon have to increase in order to curb spiralling inflation, which is at twice the target level set by the government.

The government has acknowledged that the level of unemployment soared in the latter part of 2010 but claims that it has now started to improve again. Chris Grayling, the Employment Minister, stated: “We’ve got a long way to go and I want to see these figures start to come down, but certainly the evidence is over the past month things have settled down and we are not seeing the increases we saw earlier in the last quarter.”

Tags: strong possibility, concern, evidence, business, Minister, inflation, addition, interest

Interest rates need to rise in the UK

It has been claimed by an organisation that the base interest rate in the UK needs to be increased in order to keep inflation under control, with the group claiming that it is necessary to increase the rate this year and increase it further over the course of next year.

The claim was made by the Organisation for Economic Co-operation and Development, which has stated that the base rate needs to be increased this year and by the end of next year needs to be at around 3.5 percent in order to keep a lid on inflation, which has already been soaring past the government target of 2 percent.

The base interest rate has been at its lowest level in the history of the Bank of England for well over a year now, standing at just 0.5 percent. However, inflation has been soaring and some officials now believe that in order to bring inflation down the base rate will need to be increased.

If the base rate does go up the cost of borrowing could also rise, which means that consumers may have to pay more interest on loans and mortgages. The OECD has said that whilst the government made the right move by reducing the base rate to this rock bottom level during the recession it was now time to consider increasing it.

A report from the OECD stated: ‘The gradual drift up of some measures of inflation expectations implies a need to increase interest rates earlier than previously thought and no later than the last quarter of 2010. The projected increase of core inflation to the Bank of England target warrants an increase of the policy rate to 3.5% by end-2011.’

Tags: interest rate, inflation, OECD, order, borrowing, Mortgages

No movement in Bank of England base rate

It has been announced by the Bank of England that the base rate is to remain at its record low level of 0.5 percent once again, making this the eleventh month in a row where the base rate will have been at its lowest level in the history of the Bank of England. The decision comes just over a week after it was announced that the UK had finally joined other major economies by coming out of recession. Read more

Tags: bank of england, inflation, recessions, interest rate, base rate, economics

No increase in base rate again

For the ninth month in a row the Bank of England has decided to keep the base interest rate on hold, leaving it static at its lowest level in history, which is just 0.5 percent. The decision to keep the base rate so low has come as no surprise to most industry experts given the ongoing problems facing the economy and further threats of job losses. The announcement was made following the December Monetary Policy Committee meeting, which was held last week.

The Bank of England also announced that it would continue with its quantitative easing program to try and revive the economy, having announced last month that the plan was being extended to a total of £200 billion, reflecting an extension of a further £25 billion. Originally the maximum amount earmarked for quantitative easing had been £150 billion. No clue was given as to whether the scheme would be extended further next year.

Many industry experts have slated the quantitative easing programme, stating that it is clear that the plan is not having the desired effect on the economy but the government is continuing to use the programme to try and ease the economic problems. It is thought that when the current programme runs out in January the government will announce whether it plans to extend the scheme further.

In the meantime, an economist from Global Insight, Howard Archer, said that it was likely that the Bank of England would keep the base rate on hold at 0.5 percent until late next year, and even predicted that it could be 2011 before the base rate was increased. He said that fears over unsustainable recovery meant that it was far too soon for the government to think of policy tightening.

Tags: inflation, Howard Archer, economist, Global Insight Inc, The Bank of England, Global Insight, base rate, interest rates

Increase in household spending

Figures from a recently released report have shown that household spending levels have increased enormously over the past five years in order to cope with rising household bills and living costs. The figures were released some weeks ago by the Office for National Statistics, and showed that the average weekly household spend had gone up by around 13 percent in the past five years. Read more

Tags: gas, office, GBP, economics, interest rates, household spending, energy usage costs, inflation

Sixteen year high for inflation in UK

According to recently released figures the level of inflation in the UK has now reached a sixteen year high, with inflation for September registering at 5.2%. The high cost of food, oil, and energy has been blamed for pushing inflation levels up to such a high figure, and the level of inflation is now way more than the 2% target set by the government. Inflation has been soaring for some months, and as a result of this the Bank of England has been unable to cut the base rate as quickly as had been expected at the start of the year, although it did apply a surprise 0.5% cut recently. Read more

Tags: government, surprise 0.5% cut, September, deflation, key issue, inflation, sixteen

Food prices could go up again due to harvest

Over the past year consumers have had a lot of rising costs to cope with, ranging from bills and energy prices through to petrol and food. In fact, inflation on food as been one of the most marked rises that consumers have had to put up with, and many households – especially those that have children and larger families – have seen the cost of their weekly or monthly shop rocket. Read more

Tags: World food price crisis, effect, food prices, harvest, grocery, small percentage, Marketing, inflation

Inflation at 4.7%

Recent figures have shown that inflation levels in the UK have soared even further out of control, rising from 4.4% to 4.7% for August. The government target for inflation is just 2% so the current rate of inflation is way beyond the target. The jump to 4.7% was higher than many industry officials had anticipated, according to recent reports. There is also speculation over how far inflation will keep on rising, with some senior officials predicting that it will hit 5% or beyond by the end of the year. Read more

Tags: October, base rate, inflation, current rate, energy prices, marked slowdown, increase, Monetary Policy Committee

Will inflation levels get worse before they get better?

The financial headlines has recently been filled with news about the soaring rate of inflation, and this comes as no surprise given that the rate of inflation has soared to its highest level since records began in 1997. For some months now the rate of inflation has been steadily rising, and it has been soaring above the government’s target of 2% for some months now. For July the rate of inflation hit an all time high of 4.4%, which came as no surprise to many who had already predicted that the rate of inflation would keep on rocketing. Read more

Tags: Economy of the United Kingdom, control, economics, degree, stagnant economy, Banking, Stagflation, inflation

Gas bills could rocket within the space of a year

A recent report claims that gas bills could rocket within the space of a year, with some households paying in excess of £1000 a year for their gas usage. The cost of gas usage went up earlier this year, along with electricity prices, and the energy firms are now in the process of raising prices or arrange price raises for later in the year, blaming a rise in the cist of wholesale energy prices for the increase in energy usage costs. Read more

Tags: Readings, significant proportion, household budget, global contagion, production costs, inflation, increase, energy

Inflation levels continue to soar

Inflation levels in the UK have been at the centre of concern for the Bank of England and other government sectors for some months now, having rocketed to way over the government’s target earlier this year, and showing signs that the rise is set to continue. The government target for CPI inflation is 2%, but for the past few months it has soared out of control. In May the level of inflation hit 3.3%, and this resulted in the governor of the Bank of England, Mervyn King, having to write to the Chancellor of the Exchequer, Alistair Darling, to explain why inflation levels had soared so high, and what was going to be done to bring them back towards target.
Read more

Tags: economics, Central bank, The Prime Minister, industry, Many industry officials, cpi inflation

UK economy in worse shape than imagined

According to the largest manufacturer’s association in the UK, the CBI, the state of the economy in the UK is in worse shape than most actually thought. The CBI has said that the economy is deteriorating far faster than was originally thought, with the association’s director stating that there was “no doubt that the mood has darkened in the last two or three months.” He gave the stark warning to members in a letter. Read more

Tags: Association, inflation, economy, Lambert, Additions, credit crunch, Mervyn King, director stating

Does inflation level mean that rate cuts are ruled out?

Inflation levels over recent months have been soaring, and in July inflation hit the highest levels since records began in 1997. coming in at 4.4%. In fact, inflation has been soaring for quite some months, and has been way over the government target of 2%. The latest rise in inflation has resulted in the rate of inflation being more than double that set by the government. Read more

Tags: highest levels, energy usage, inflation, concern, Worryingly, oil, energy, Business Finance

Inflation levels hit 11 year high

June saw inflation levels rise to an eleven year high of 3.8% as a result of soaring food and petrol prices, according to recent reports. The rate of inflation for May had already hit highs of 3.3%, resulting in the governor of the Bank of England, Mervyn King, having to write to the chancellor, Alistair Darling, to explain why inflation had soared so high and what would be done to bring it back down. However, the situation is now even worse, with inflation nearly double the government’s 2% target. Read more

Tags: committee meeting, governor, member voting, gordon brown, Everyone

Interest rate stays at 5%

Following the July Monetary Policy Committee meeting last week it has been announced that the base interest rate is to remain on hold at 5%. The Bank of England cut the base rate three times since December, taking it from 5.75% to 5%. However, since May the base rate has remained static after inflation levels soared to 3.3%, which is way over the 2% target set by the government. Read more

Tags: light, uk factories, meeting, inflation, interest rates

Some Brits losing money on savings

British taxpayers earning less than 5.4 per cent on their savings are losing money in the current economic climate, a new report warns.

With the retail price index at 4.3 per cent, consumers who are making taxable savings need to earn 5.4 per cent interest at least if they are to break even, a new report from moneysupermarket.com states.

There are currently 487 savings and current accounts which offer less than 5.4 per cent, the report notes.

Kevin Mountford, head of savings at the price comparison site, urges the government to consider ending the tax on savings as it tries to control the cost of living.

“Savers, especially those paying the higher rate of tax, should make sure they take full advantage of their annual £3,600 Isa allowance if they want to inflation proof their finances,” he adds.

Earlier this month, Nationwide Building Society released the results of a survey into saving attitudes which showed that while three-quarters of British consumers feel saving is important, just half of people in the UK do save regularly.

Tags: report notes.kevin mountford, price, consumers feel saving, british taxpayers, inflation, cent, tax, Brits

Inflation hikes are making life “tougher”

With inflation rising higher this week than analysts predicted it would, an expert has said that the situation is making life “tougher” for many people.

According to Ann Robinson, director of consumer policy at uSwitch.com, some consumers have seen their food, energy and other essential bills increase by 20 per cent over the past year.

Ms Robinson commented that many people are feeling the pinch as living costs continue to rise yet salary increases lag behind.

“We are working harder than ever before but we are not getting any richer.”

Ms Robinson warned: “With inflation misery set to continue this summer, this is a difficult time for consumers.”

Earlier this week inflation went over three per cent and Ms Robinson advised consumers to carefully review their household budgets and try to make savings wherever possible.

She pointed out that people could save an average of £1,500 on essentials by doing so.

Tags: consumer, salary increases, essential bills increase, percentage, inflation, food

Consumers must curb borrowing, says Osborne

The shadow chancellor George Osborne has said that people need to make an effort to curb their borrowing and take out fewer loans.

Speaking on Channel 4’s ‘News at Noon’, Mr Osborne said that in order to get inflation under control, people must cut their spending.

“People have to be cautious about entering into long-term financial commitments. For example, looking at how much they’re borrowing and watching the pennies basically,” he commented.

This comes just as MGM Advantage has revealed that 55 per cent of Brits are putting their money into savings accounts, although one in five of those in debt still prefer to keep their money at home than in the bank.

According to a recent survey by the company, at the other end of the scale, one in four of those who have more than £1 million in assets also shun savings accounts in favour of stashing their cash at home.

Tags: inflation, cash, finance, Business Finance, borrowing, shun, channel

Cash stashed at home will ‘drop in value’

Savers who prefer to keep their money stashed away at home rather than in a savings account are missing out on interest and will only see their funds drop in value over time, the Newcastle Building Society has said.

The senior marketing executive at the building society, Steve Urwin, noted that not only will people not be earning interest on their savings but that the effects of inflation mean that money sitting at home will continue to “decrease in terms of relative value”.

Mr Urwin also pointed out the security risks of leaving money at home, since it is a prime target for burglars.

According to the Daily Mail building societies saw deposits hit a record high last September, with the biggest demand being for savings accounts and cash Isas.

The Newcastle Building Society said that this trend is an indication that people are becoming more cautious with their savings as they start to feel the effects of the credit crunch.

Tags: mean, ISAs, Steve Urwin, money, indication, prime target

Inflation ‘four times higher’ than official figures

The real rate of inflation is around four times what official figures say it is, according to a new survey.

A poll by Fool.co.uk suggests that 93 per cent of people “feel” inflation as being much higher than the current 2.2 per cent claimed by the government.

In fact, the survey puts the average “felt” level of inflation at 8.1 per cent, with five per cent of people putting the figure at 15 per cent.

People in their 40s are the hardest hit age group, experiencing inflation at an average of 8.8 per cent.

David Kuo, head of personal finance at Fool.co.uk warned: “The government can boast as much as it wants about its success over controlling inflation. However, people feel inflation through the shrinking pound in their pockets; they don’t experience it through a theoretical government shopping basket.”

In particular, the basket of goods used by the government to calculate inflation omits the cost of housing and mortgages.

The effect of inflation is being felt hardest by people in the West Midlands, where the average for all people was found to be 8.8 per cent. Northern Ireland has the lowest rate of “felt” inflation, at 6.8 per cent.

Tags: cent, basket, finance, inflation, fool, age group, pockets, David Kuo

Paying off last year’s debts contributing to budget strain

Paying off last year’s debts and current levels of inflation are both using up consumers monthly budgets, one debt expert has claimed.

Debt Action said as inflation has kicked in, people have found that more of their take-home salary is taken up with paying back pre-Christmas loans as well day-to-day expenses.

Chris Tapp, director of Credit Action, said that increasing numbers of consumers have been forced to use their credit cards to fund their everyday lifestyle.

“This is a very worrying scenario to find yourself in and at that point – when you start using your credit card as a necessity, or you’re unable to pay it off month by month – you should go and get help,” he stated.

Credit Action also warned that in the long-term, consumers cannot use a credit card to pay off a mortgage and this is a “worrying indicator” for a spenders’ financial future.

According to figures from Debt Help UK, up to 74 million credit cards have been issued in Britain and by 2009, credit card possessions are estimated to rise to 99.2million cards.

Tags: Stoozing, card, consumers monthly budgets, inflation, strain, Chris Tapp, personal finance, christmas

Temporary public ownership of Northern Rock ‘best option for taxpayers’

Temporary public ownership of Northern Rock is the best option for taxpayers, claims prime minister Gordon Brown.

Speaking during his monthly press conference with chancellor Alistair Darling, Mr Brown said, after considering the two takeover bids, nationalisation was the best option for the troubled bank.

Speaking to the BBC, Mr Brown said: “We will have and always will put the interests of taxpayers first.”

“It was the best decision to protect depositors, mortgages holders and employees of Northern Rock,” he continued.

The Prime Minister stated that this was a time of global financial turbulence, with a downturn in the US and added that the actions of Mr Darling had made the UK better prepared.

Mr Brown also said that the test of economic competence was running a stable economy, and in the UK growth was higher than any G7 competitors, with strong interest rates and inflation.

Meanwhile, the addition of the company’s balance sheet already to the public finances, has boosted Britain’s debt burden above 40 percent of gross domestic product, reports Bloomberg.

Tags: prime minister, inflation, company's balance sheet, mortgages holders, best option, G7, turbulence

First-timer buyers ’should listen to Bank’s warning’

First-time buyers who have taken out interest-only mortgages should reduce their loans following the Bank of England’s (BoE’s) prediction of economic depression, one financial expert has claimed.

According to Fool.co.uk, those who have taken out interest-free mortgages to get a first foot on the property ladder could face bleak financial times ahead, as lenders tighten their financial belts.

David Kuo, head of personal finance with Fool.co.uk, said that the BoE’s Inflation report should set “alarms ringing” in the ears of first-time buyers.

“In future, lenders may tighten the credit-scoring criteria and choose to reduce the maximum loan to value (LTV),” he warned

Mr Kuo added that: “This will put borrowers who have taken out 90 per cent mortgages at risk, especially if the value of their homes decline sharply when they remortgage.”

Fool recommended that making overpayments as, according to its calculations, every £1,000 of those will reduce the loan by the same amount and reduced the interest bill by £1,500 over 25 years.

Meanwhile, according to the Royal Institute of Chartered Surveyors, house prices have reached their lowest point since the crash during the 1990s.

Tags: Business Finance, lenders, inflation, foot, GBP, Chartered, crash

A quarter of a billion pounds left in accounts says investment provider

A new initiative has been launched to reunite consumers with their lost bank accounts after it was announced that an estimated quarter of a billion pounds has been forgotten.

National Savings and Investments said that the main reason for money being left in accounts is moving house.

Ayesha De Silva, online manager for NS&I, said: “People often hold an account with two or three different providers over the course of a lifetime and when they move house, it’s the simple fact they forget to tell all the relevant people.”

She added that this situation is exacerbated by every move that a person makes meaning that the funds can just “sits there for years and years and years”.

In research carried out by TNS Phonebus last year, national statistics show that ten per cent of people believe they have lost savings they had as a child.

Only 26 per cent of these people have tried to reunite themselves with their lost money.

Tags: National Savings, house, quarter, inflation, bank accounts

Consumers better barometer of inflation than statistics

Spenders maybe “a better barometer of inflation” than statistics from the government’s Office for National Statistics claim financial experts.

Findings from research conducted among Fool.co.uk’s readers reveals that many believe inflation to be between six and seven per cent rather than the two per cent stated by the government.

David Kuo, head of personal finance at Fool.co.uk, said: “We are slowly beginning to see that these inflation figures are slowly beginning to feed through.”

He added that although at the moment interest rates are seen to be coming down because the Bank of England is very worried about a recession, “we do honestly believe that there is inflation within the economy”.

This time last year, the BBC reported that inflation was at an 11 – year high as higher fuel costs helped to push up the consumer price index (CPI) to 2.7 per cent in November.

On January 10th, the Bank of England voted to maintain the Bank’s rate at 5.5 per cent, having cut the rate by 0.25 per cent back in December.

Tags: cent, fuel costs, head, bbc, inflation, government, Fool.co.uk's readers, research

Inflation Report Signals Further Rate Rise

The Bank of England has given clear signals that interest rates may have to rise yet again to make sure that it keeps inflation under control. Homeowners will be dreading the possibility of yet another rate rise as they have seen five quarter point rises already ion the past 12 months.

Experts now believe that the rise will come sooner rather than later after the Governor of the Bank, Mervyn King, said that he believed the turmoil in credit markets – set off by the sub-prime crisis in the US – was far from being an international financial crisis. Given that comment, experts think that he will not be afraid of recommending a further rate rise in the UK in the near future. Indeed, there are some doom-mongers who suggest that an interest rate of 6.5% – or even higher – could be reached.

A quarter point rise on a mortgage of £110,000 would mean an increase in monthly repayments of over £16, and on a mortgage of £200,000 the increase would be £30 a month.

A further quarter point rise now looks likely in September. Mr King said: “[We] cannot be sure if what we’re seeing so far foreshadows a more disruptive move on the markets or whether there’s a more gradual easing of pressure that allows credit spreads to widen to more sensible levels. So it’s impossible at this stage to judge how large and how persistent the tightening of credit conditions is likely to be.”

Adding that he did not see the recent events, which have seen some US investment banks in trouble because of defaults on loans and some big takeovers postponed, as an international financial crisis, he went on: “We are seeing signs of bad loans arising clearly in the US, but I don’t think we are seeing signs of these bad loans in other markets. The developments in [the widening of] spreads is a more realistic pricing of risks which we welcome.”

Mr King said that it was not the duty of central banks to give protection to any financial institutions if they get in trouble for poor lending practices.

The Bank’s quarterly inflation report said that inflation would come back down to 2% if interest rates rose according to market expectations, and that would be one more quarter point rise before the end of the year. It is difficult to see the Monetary Policy Committee waiting too long before implementing the rise. The report said that risks to inflation remained on the upside but not as much as a few months ago. It now expects economic growth to dip to 2.5% in the next two years from about 3% now.

Mr King was concerned that official figures did not accurately measure the strength of the economy, and may be revised upwards. The near term outlook for inflation had the bad news of higher food prices from flooding influencing it.

Inflation was also under threat from rising oil prices and potentially increasing wages demands, but Mr King did note that consumer spending was cooling. However, there has been surprise at the resilience of consumer and housing markets despite the five rises since last August.

Mr King insisted that 6% was not yet a done deal.

Tom Smith
1st October 2007

Tags: interest, rates, markets, housing, costs, increase

Bank of England makes quarterly report

The Bank of England’s latest Quarterly Inflation Report, published today, seems to hint at future interest rate rises.

Charts in the report seem to suggest that inflation will not drop to the bank’s desired level of 2 per cent if rates stay as they are.

The base interest rate has been increased five times in the last 12 months, and currently remains at 5.75 per cent.

Economist James Knightley at ING said that the report was “mildly on the hawkish side”, and signalled that “interest rates have to rise”.

He predicted a rate of 6.25 per cent by the beginning of 2008.

With interest rates whole percentage points lower two or three years ago, mortgage holders on variable rates are currently being faced with big hikes in their monthly payments – a situation which will get worse still if rates rise yet again.

Analysts Morgan Stanley estimate that 70 per cent of mortgage holders in the UK are now on variable rates, compared with 20 per cent just five years ago.

Tags: inflation, base, quarterly inflation, Morgan Stanley, interest rate, percentage

Super-Prime London Prices Shoot Upwards

The price of houses at the very top of the London property market achieved record growth in June. Research by estate agent Knight Frank shows record growth of 3.1%, which is the fastest growth in a month since the agency began its records in 1976. It also found that the annual rate for the same market was 34.5% in June, which is the largest figure for a years seen since 1979.

Those properties seeing the largest rises were between £1m and £2m, and those valued at over £4 million. House prices in the latter bracket have gone up by an amazing 43% in the last twelve months. The areas where house prices have gone up the most are SW3 and SW10, with a 40% rise on houses valued at over a million in the last year. Properties over a million pounds represent 7% of the London property market.

It looks as though prime London is having an almost unstoppable surge in house price inflation, but deeper research actually shows that the highest growth is at the very top end of the market – super-prime London. For example, the growth of properties valued at just below a million in the same areas had slowed down, no doubt under influence from recent interest rate rises and other economic factors putting the squeeze on homebuyers. A slowdown for super-prime London house prices would probably mean that there was a huge economic problem on a global scale as many buyers are foreigners.

Further out of central London, areas like Hampstead, Wapping and Wimbledon have seen growth of 11.4% in the first six months of 2007, giving annual growth of 21.8%. These don’t match up to super-prime increases, but still show superior growth to the broader London house market.

Knight Frank’s assessment is that the normal house market slowdown in the summer will be cooled even further by other economic factors, but super-prime central London will still have annual growth of around 25% come December.

Meanwhile it has been calculated that the cost of an extra bedroom in a large property in London is £161,221. That figure is £20,000 higher than the cost of an average home in Scotland. The figure is worked out from the average price of a three-bedroom property in the capital as £396,387, and the average price of a four-bedroom home is £557,608.

It is such a difference that forecasts are that London homeowners will look for more ways to improve or increase the size of their existing property such as an extension or loft conversion, rather than seek to move.

The difference between and one-bedroom property and a two-bedroom property is much less, at an average of £89,751. In London there are currently around 13,600 two-bedroom properties up for sale, but less than 6,000 one-bedroom properties. Such as shortgage of smaller properties is a concern for first-time buyers as that key difference in price for an extra bedroom would evidently be a showstopper for many new buyers. It is unlikely that this situation will ease with London market continuing to push upwards.

Tom Smith
26th July 2007

Tags: increase, foreigners, property, prime, prices, interest, london, inflation, house, Mortgages

Brits losing a fortune by failing to put their cash in savings accounts

In the olden days stashing your money in various cunning locations around the house seemed to be the norm, as many people did not have access to savings accounts as they do today.

However, according to a recent survey there are still an alarming number of Brits that insist on keeping their cash in the house, which not only raises security issues but also means that collectively Brits could be losing out on millions of pounds worth of interest from banks and building societies each and every year.

A recent survey was carried out by Virgin Money, and according to the result of the survey around one in every six adults in Britain are still keeping cash in the home rather than opting to place it in a savings account. The results indicate that if these people were to put the cash that they have kept in the house into an average Internet savings account they could be accruing around £174 million each year in interest collectively. Instead, this money simply sits around earning nothing for them, and increased the risk of financial losses through theft in the event that the cash is stolen by a visitor or the house is burgled.

The survey showed that one percent of Brits that were surveyed admitted to having up to one thousand pounds in the home, whereas two percent of Brits stated that they had up to five thousand stashed in the home. Experts warn that since inflation has been on the rise, and the money is simply lying around failing to accrue any interest, it is in danger of losing its purchasing power, so consumers are doing nothing to help themselves by leaving it in the home.

Industry professional add that there is around three and a half billion pounds in total that is lying around the homes of Brits rather than being placed into savings account, and that this amount could depreciate by two hundred million pounds within the next three years.

Tom Smith
10th June 2007

Tags: spend, savings, earn, lose, value, inflation

Interest rates frozen

The Bank of England has decided to freeze interest rates at 5.5 per cent.

The monetary policy committee (MPC) made the decision following a quarter point rise in May and after four rate rises since August 2006.

Industry figures had widely predicted the move as it was thought that the MPC would want to wait and see what effect the last rise had.

Despite the decision being good news for those with loans, mortgages and credit cards, borrowers are being warned that further rate rises are likely in the near future.

“The majority of economists are calling for a rise in July but if we need another increase it would be more logical for the MPC to wait until the next quarterly inflation report in August before making that decision,” said Ray Boulger from mortgage advisor John Charcol.

“With the total previous rise of one per cent looking like it is doing the trick, I believe the MPC will want more time to see if this is indeed the case.”

This sentiment has been supported by a number of figures, with research firm Global Insight also predicting another rate rise in August.

“We believe that the MPC is likely to act by August at the latest to try to stamp out the significant upside risks to longer-term price stability,” said Howard Archer from the firm.

Tags: interest, rate, inflation, case, Insight, bank of england, report, longer-term price stability

What the recent interest rate rise means for your mortgage repayments

On 11th May the Bank of England increased its rates by another 0.25% to 5.5%, meaning that six million homeowners in Britain will face bigger monthly payments for their mortgages. Read more

Tags: house, mortgage, bank, surveyors, prices, rates, england

Consumers were ‘expecting’ rate rise

The latest interest rate rise is not going to have too much of an impact on consumers as most people were expecting it.

That is the opinion of Lloyds TSB and its Consumer Barometer which shows that pessimism over interest rates grew in April.

Only four per cent of those who responded to the bank’s survey were expecting interest rates to fall in the next year, with the vast majority anticipating a rise.

This, says Lloyds, should mean that most people will have taken the rise to 5.5 per cent in their stride.

“Pretty much everyone expected the base rate to rise last week,” revealed Trevor Williams, chief economist at Lloyds.

“For consumers, forewarned is forearmed and the impact is likely to be much less than if the rise came out of the blue.”

It means consumers should have planned ahead and will be able to keep up with repayments on loans, mortgages and credit cards.

Although there was also increased pessimism about increasing prices, the barometer also showed that people are optimistic about job security and opportunities.

Tags: stride, pessimism, cent, Trevor Williams, barometer, inflation

Consumers having problems finding online savings accounts

For some time industry experts have been urging consumers in the UK to shop around when it comes to finding a suitable savings account and not to stick with a savings account that they may have held for years just out of loyalty or apathy.

According to experts many savings accounts are not following the interest rate and inflation rises, and therefore consumers that save their hard earned money in these accounts are getting a raw deal when it comes to earning interest.

However, according to recent date many consumers that are taking up this advice and trying to find new savings accounts online are hitting a brick wall, with a number of financial institutes refusing to let new customers open online accounts, and reserving them strictly for existing customers – making it more difficult for those with a poor existing savings account to switch to one that pays better interest or offers more benefits.

More information: The Process and Benefits Of Switching Bank Accounts

The review into online savings accounts was carried out by Global Review, and shows that many consumers are being left out in the cold when it comes to finding better interest rates on their savings. According to Moneyfacts there can be a huge difference in interest rate levels between the best savings accounts on the market and the lowest interest ones, but it seems that despite their efforts many consumers can do nothing about the fact that they are stuck with a low interest rate.

Amongst the banks and financial institutions refusing online savings accounts to anyone other than existing customers are Lloyds TSB, Nationwide, and Barclays. Many other banks, such as Halifax and NatWest, have also been accused of not providing adequate information to those wishing to open savings accounts with them.

Tom Smith
13th May 2007

More Information:

• Internet Bank Accounts – The Benefits and Drawbacks
• Can I Have More Than One Bank Account?
• Opening and Closing Bank Accounts
• Savings Accounts – Are They Worth It?

Tags: locked, higher, interest, Banking, accounts, earn

Isa limits grow but not enough

People who are looking to invest money in a cash Independent Savings Account (Isa) have been given a welcome boost in Gordon Brown’s 11th Budget.

The Chancellor of the Exchequer announced that investors can now save an additional £600 in an Isa and will be free from paying tax on that money.

When cash Isas were first introduced in 1999 the maximum tax-free savings amount was £3,000. This figure has never changed until now.

Despite the increase being well received by many, Mr Brown has been criticised for only raising the total Isa limit by £200 to £7,200.

Critics argue that while the £3,600 limit is in line with inflation, the £7,200 limit falls well short.

“While the increase in the cash Isa allowance is a welcome move, we believe more should be done to encourage long-term savings,” commented Mike Regnier, head of savings at Halifax.

“If the total ISA allowance had risen in line with inflation, savers would now be able to invest around £8,500 per year, free of tax.”

The increase on total Isa limits has been labelled “meagre” by the Association of British Insurers, which called for the government to continue increasing limits in the years to come.

Gordon Brown’s new Isa limits will come into effect from April 2008.

Tags: inflation, stock, long-term savings, tax, total isa allowance, money, total isa, increase

Interest rates frozen

Interest rates are to remain at 5.25 per cent after the Bank of England decided not to increase the rates further.

Last month the bank surprised everyone by announcing an increase of 0.25 per cent, but today’s decision had been widely anticipated.

The Bank of England’s Monetary Policy Committee (MPC) has increased interest rates three times in the last six months, as it tried to bring inflation rates under control.

Today’s decision to freeze interest rates will be welcomed by those who have a mortgage, but there are warnings that future rises are almost inevitable.

“Today’s MPC decision to maintain the base rate at 5.25 per cent will come as a welcome relief to borrowers, but many market analysts will view this latest decision by the Bank of England as a mere delay of an inevitable further rate rise,” said Mehrdad Yousefi from Alliance & Leicester.

“Inflationary pressures on the economy remain strong, including some above inflation pay deals, and they will play a key part in future base rate decisions.

“The consensus of opinion is that it is very likely that we will see another rate rise in the first half of 2007, so it is crucial that borrowers assess what impact any possible future base rate rises could have on their finances,” he added.

In January it was revealed that inflation was running at levels not seen since 1997 when the Bank took control of setting interest rates from the chancellor.

People borrowing money should be sure that they have the financial flexibility to cope with a sudden rise in interest rates.

Tags: england, base, inflation, today's decision, base rate, pay