Over half of Brits hope to see base rate increase

When the Bank of England originally announced that the base interest rate in the UK was being dropped to an all time low of just 0.5 percent thirty months ago, there were many people who were ecstatic as a result of being able to save money on their outgoings and borrowing in what had become a very difficult financial and economic climate.

However, thirty months on the base rate is still at this record low and whilst the economic and financial climate is still difficult a rising number of people are now starting to hope that the base rate will soon start to increase again. Whilst many borrowers have indeed benefitted from the low base rate there are also many that have suffered, such as savers who have lost a fortune in interest on their savings and consumers who have seen inflation soar.

A recent survey has revealed that more than half of UK consumers are now hoping that the base interest rate in the UK will increase for one of a number of reasons. In total, 52 percent of consumers are hoping to see the base interest rate increase. Of these, 41 percent wanted the base rate to rise so that they would be able to get better returns on their savings, which have really suffered over recent year. A further 11 percent said that they would like to see the base rate rise in order to tackle soaring inflation.

One industry expert stated: “With the Bank of England Base Rate sitting at a record low for the past two and a half years it is clear that there have been winners and losers, with savers generally feeling the combined impact of low rates and high inflation. Some borrowers have benefited, particularly those mortgage borrowers with large deposits, or those who want to borrower larger amounts on personal loans.”

Tags: uk consumers, rate increase, interest rate, combined impact, increase, recent survey, winners and losers, low rates

Are you considering a fixed rate mortgage?

There are many people at the moment who are considering switching to a fixed rate mortgage amidst fears that the base interest rate could increase over the next few months, leading to a rate rise on variable rate mortgages and resulting in higher mortgage repayments. Over recent months many homeowners have waited with bated breath each time a Monetary Policy Committee meeting takes place to see whether the base rate is set to increase.

The speculation with regards to whether the base rate will increase over the next few months has continued to increase. Many believe that the base rate will stay at its record low of 0.5 percent for some time to come because of concerns about the continued fragility of the UK economy. With the rate setters still having to consider the effects a rate increase could have on the economy at what is still a very difficult time some believe that it would be irresponsible for the MPC to increase the rate at this stage.

At the same time many believe that the fact that inflation has soared to way over the 2 percent target set by the government means that the MPC will have to increase the base rate in order to bring inflation down and then keep a lid on it. If this is the case then the base rate may increase sooner rather than later, which could result in homeowners with variable rate mortgages seeing their interest rates and repayments go up.

Anyone that is considering whether or not to switch to a fixed rate mortgage needs to do a little research. It is important to look at the fixed rates that lenders are offering to determine what sort of rate you will be able to get if you do decide to switch. It is also important to work out whether you would be able to afford any increases in repayments if the base rate was to rise.

In this particular climate, with so many differences in opinion with regards to future interest rate movement it is difficult for people to decide whether to switch to a fixed rate deal or just continue with a variable rate one and hope for the best. Some people have already taken action and switch to a fixed rate before the rates go any higher in anticipation of a base rate rise.

One official said: “The stand-out trend in the mortgage market at present is the increase in the number of rate-wary borrowers remortgaging onto fixed rates. People know that rate rises are coming and they are locking in now before fixed rates move higher. Essentially, borrowers are running for cover.”

Tags: increase, fact, uk, speculation, rate increase, interest rate, anyone

More people rush to fix their mortgages

It has been announced that a rising number of homeowners are rushing to fix their mortgage rates amidst fears that the base interest rate could shoot up over the course of this year. With inflation having rocketed to nearly double the target set by the government there are concerns that the base rate will have to be increased in order to bring inflation down to a more acceptable level.

With the speculation and rumours over when the base rate will increase many homeowners with variable rate mortgages are now getting concerned, and are flocking to try and get their mortgage rates fixed. As a result of this surge in demand many lenders have been pulling their cheapest deals and replacing them with more expensive ones.

There are concerns that inflation is set to soar even higher, and the shocking increase in the cost of living has sparked panic amongst homeowners who are now worried that interest rate increases are set to send repayments rocketing. Some economists expect inflation to rise to a staggering 5 percent within a matter of months, which would force the Bank of England and the Monetary Policy Committee to start increased interest rates. This would then impact on repayments on mortgages, and could tip many homeowners over the financial edge.

One mortgage broker said: ‘People will rush to fix because they’ve probably been worrying about interest rates for a while. It is inevitable that more people will fix because rates are expected to start rising.’

Around two thirds of homeowners currently have variable rate mortgages. However, a fixed rate mortgage offers the security of static repayments for the period of the fixed term, which will remain the same even if interest rates increase.

Tags: bank of england, rate increases, interest rate, rate, economists, base interest rate, term

Banks fleecing customers with overdraft fees

It has been revealed in a recent report that many of the UK’s banks are fleecing their customers with extortionate overdraft rates and fees despite the fact that many of the customers, as taxpayers, have a stake in the banks because of the bailouts that occurred during the credit crisis, which were funded by taxpayers’ money from the public purse.

Last month these overdraft rates are said to have hit a new high, coming in at an average of 19.1 percent. This is despite the fact that the base interest rate still stands at a record low of just 0.5 percent, which is where it has stood for the past eighteen months. The margin between the base rate and the rates that banks are charging on overdrafts is now astonishingly wide, and many of the most cash strapped customers are being hit with the rocketing overdraft charges.

Natwest and the Royal Bank of Scotland are said to be amongst the worst offenders, and these are both part of the RBS Group, in which taxpayers have a massive 84 percent stake. The average rate of interest charged on overdrafts was a massive thirty eight times more than the base interest rate, which means that banks are making a huge profit from customers that fall into the red.

An official from the Independent Banking Advisory Service said: ‘Banks have been allowed to increase their margins despite the bank rates being so low. There is no incentive for them to do otherwise. The level of profiteering is completely out of control. Nothing about it is fair or reasonable. We face reduced incomes and increase household bills and yet again the banks are compounding our misery. We bailed them out but they have no qualms about making matters worse in our hour of need. The Government should introduce a cap on the rates. But instead it protects the banks at our cost.’

Tags: crisis, interest rate, fee, Bank charge, overdraft fees, bank, high

No move for base interest rate

The Bank of England has announced that the base interest rate in the UK is to be kept on hold once again, which means that this will be the eighteenth month in a row that the base rate will have been kept at the record low of just 0.5 percent. The announcement came after the August Monetary Policy Committee meeting.

The decision to keep the base rate at 0.5 percent, which is the lowest in the history of the Bank of England, has sparked speculation that the Monetary Policy Committee is not all that concerned about rising inflation, which at present is much higher than the government target of 2 percent but is expected to fall closer to its targets level over the course of the year.

The central bank also said that the quantitative easing programme was still on hold. The programme was started by the former Labour government, and so far £200 billion has been pumped into the economy through this scheme. The MPC has now said that whilst the scheme will be kept on hold for now there is still scope to use it again in the future should it be necessary.

In the meantime many industry groups have welcomed the decision for the bank base rate to be kept on hold, with officials stating that this could help to revive the economy. The British Chambers of Commerce said that the cuts that the coalition government had made to address the public deficit would impact on the economy, so keep the base rate on hold had been a necessity.

David Kern from the BCC said: “The MPC made the right decision. The tough deficit-reduction measures announced in the Budget, although necessary, will inevitably increase the threat of a UK economic setback. Given the precarious economic background, it is absolutely vital that the MPC maintains the current low level of interest rates until the second quarter of 2011 at the earliest.”

Tags: interest rate, bank of england, Monetary policy, Central bank, bank base rate

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

Loan hikes have made millions for UK banks

According to a recent report banks in the UK have managed to make millions of pounds as a result of sneaky hikes on loans and other forms of borrowing. The claims have been made following an investigation by a finance group, which shows that since they started making huge losses during the credit crunch the banks have been merciless on their attack on consumers in order to try and shore up their own finances.

It is claimed that banks have been making up the losses on their books by slyly increasing the rates of interest charged on borrowing whilst at the same time reducing the rate of interest on savings accounts to the point where some savers are earning practically nothing on the money that they put into their savings.

Officials claim that banks are getting away with this because of the rock bottom base interest rate, which still stands at just 0.5 percent, which is the lowest it has ever been in the history of the Bank of England, and it has been at this level for well over a year now.

The low base interest rate has fooled many people into thinking that borrowing is cheap at the moment. However, what has in fact happened is that the gap between the base rate and the rates that lenders are charging has expanded resulting in what has been described as an eye watering margin. The fact that the base rate is so low, coupled with the fact that many of these banks have been bailed out by the taxpayer, appears to have provided no benefit to borrowers.

An official from the consumer campaign group Which? said: ‘We paid for the banks’ failures once when we bailed them out and now they are getting a double hit by taking more of our cash.’

Tags: interest rate, banks, credit crunch, Loans, Economic history, investigation, finance

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

Savers group hoping for support

A savers group that was set up by a retired Surrey entrepreneur is looking for support in the hope of accumulating one million signatures so that it can petition Downing Street. The group is called Save our Savers, and it is hoping to fight the cause on behalf of around thirty million savers across the UK. It was set up by seventy year old Peter Duckworth, who invested around half a million pounds of his own cash to found the company. Read more

Tags: government, savings, Peter Duckworth, Surrey, interest rate, Surrey entrepreneur, voice, savers

More lenders starting to look at lower deposits

Over the past couple of years things have been very difficult for first time buyers, and one of the things that has really affected the abilities of first time buyers to get onto the property ladder is the huge deposits that lenders have been demanding since the onset of the global credit crunch. Read more

Tags: demand, interest rate, 5% mortgages, cry, property

Huge mortgage gap between those with big deposits and those with small ones

A recent report has highlighted the ever growing gap between mortgage borrowers that have a large deposit to put down compared to those that have only a 10 percent deposit. Read more

Tags: mortgage deposits, number, housing, eighteen, competitive rates, Mortgages, interest rate, debt

AMEX increases rates for late payers

Credit card giant American Express has recently announced that cardholders that make late repayments on their credit card, or those that miss repayments, will be penalised with higher interest rates. Read more

Tags: payments, american express, economics, late payments, credit card charges, Credit Cards, american express credit cards

Interest rates remain on hold after May meeting

After the May Monetary Policy Committee meeting the Bank of England announced that the base interest rate was to be kept on hold at its all time low of 0.5 percent. Read more

Tags: base rate, bank of england, lowest level, interest rates, interest rate, money, Central bank, Economic policy

UK interest rates make history

Over the past week the interest rate in the UK has made history by falling to an all time low of just 1.5 percent, which is its lowest since the Bank of England was founded over three hundred years ago. Read more

Tags: interest rate, interest rates, monetary, rates, Monetary Policy Committee, aggressive cuts, level, percent mark

Credit card increases need to be questioned

Over the past few days credit card firms have pledged to make changes to the way that they hike up interest rates on credit cards, which has come under intense fire recently. However, whilst credit card firms are trying to make changes to stop these overnight interest rate hikes, there are people that may have recently already had their credit card interest rates hiked for no apparently reason, often adding a small fortune to their repayments. Read more

Tags: rate, interest rate, service, creditard firms, statement, Credit Cards

Will the rock bottom base rate help homeowners?

Over the past few months the Bank of England has been taking radical action with regards to the base interest rate. With the economy really suffering and heading for recession, and with consumer confidence at really low levels, the central bank was forced to do something to try and ease the difficulties that both consumers and businesses in the UK were facing. To the relief of many industry groups and consumers the Bank of England has taken unprecedented action recently to try and ease the situation, but this does not guarantee that consumers will actually be any better off. Read more

Tags: base rate, consumers, Macroeconomics, interest rate, committee, bank of england, rapid decline, Mortgages

BCC states that interest rate must be cut

After several months where the interest rate has been left on hold at 5% by the Monetary Policy Committee and the Bank of England, the British Chambers of Commerce is now calling for action, stating that the base rate has to be cut in order to ensure that the economy does not grind to a halt. The government is facing tough decisions when it comes to the base rate, as the nation is going through a period of stagflation, where the economy has slowed down and stagnated and the level of inflation is soaring way out of control. Read more

Tags: interest rates, UK unemployment, consumer spending, chelsea building society, interest rate, bank of england, base, British Chambers of Commerce

Still no major risk of recession

A recent report from the Ernst and Young ITEM club claims that despite the various factors affecting the economy and the financial climate in the UK, the risk of a recession occurring is still pretty low. The economy has suffered a slow down over recent months, and this is expected to continue over the course of this year. However, it is unlikely to end in recession according to the data on the report. Read more

Tags: Ernst & Young, bank of england, cheap no-questions-asked credit, interest rate, major risk, economy

Central bank governor and deputy governor did not agree on interest rates

Following the recent Monetary Policy Committee meeting earlier this month the Bank of England announced that it would be keeping interest rates on hold at 5.25%, stating that the risk of rising inflation had to be considered in addition to the slowing economy. Interest rates have already fallen twice since December, and industry experts predict that they will fall at least one more time before summer and then again in the latter half of the year.

According to the minutes from the March Monetary Policy Committee meeting there was a 2-7 split over whether interest rates should be cut in March, with the Deputy Governor of the Bank of England, Sir John Geive, agreeing with MPC member David Blanchflower that rates should be cut by a further 0.25%, which would have taken the base rate from 5.25% to 5%. However, the other seven members of the committee, including the Governor of the Bank of England, Mervyn King, wanted interest rates to be kept on hold.

The Bank of England has not taken the stance of the US Federal Reserve, which has been slashing its interest rates lately in order to try and keep recession at bay. Over the past six months the US Federal Reserve has cut the interest rates by a massive 3%, taking them from 5.25% to 2.25%. However, following the majority vote the Bank of England decided to keep rates at 5.25%. Analysts and economists are now speculating over whether there will be a further base rate cut following April’s Monetary Policy Committee meeting, although many think that the next base rate cut may come in May.

Recent Additions:

• Mortgage lender offering some impressive rates on savings
• Bank savings interest rates start to come down
• Pay and bills could further affect consumer finances
• Increasing number of first time buyers look to brokers for assistance
• Gazundering becoming more commonplace

Tags: Deputy Governor, interest rate, Business Finance, economics, Central bank governor, recent additions, cut following april

Homeowners are not as well off as tenants

Over the past year the benefits of owning a home as opposed to renting one have plummeted by 75% according to a recent report. This means that in many parts of the country people that are renting a home are actually better off than those that have bought their own home. According to the report tenants are actually faring better than homeowners in around 50% of the country’s regions.

This information was put together by the Abbey Bank in its latest Rent V Buy Index. The data indicates that those purchasing their property rather than renting a property saved around £24,000 last year. However, this year the figure has dropped dramatically to just £5800. Abbey official claim that this situation has been caused by rising property prices and sky high interest rates, which has resulted in rising costs for homeowners that have not necessarily affected those that rent.

As part of the study twelve regions were studies, and out of these it was found that tenants were better off than homeowner in six of the regions. The Abbey made these calculations based on a 90% LTV mortgage at an interest rate of 6.5%. Essential home maintenance costs were also taken into account in the survey. Read more

Tags: interest rate, mortgage, LTV, Renting, Abbey Bank

Getting a mortgage with bad credit

Unfortunately, over recent years we have seen a steep rise in the level of consumer debt in the UK, and as a result of this many people have found themselves struggling to keep up with repayments. This has inevitably led to missed or late repayments, and for many individuals has resulted in a reduced credit score and a tarnished credit history. Your credit rating can have a huge impact on your ability to obtain any form of credit in the future, which includes mortgages, and those with a very bad credit history may experience real difficulties when it comes to getting an affordable mortgage – or any mortgage – from a lender. Read more

Tags: high interest, credit, bad credit mortgages, rate, tarnished credit history

Alliance & Leicester launches new bond

Alliance & Leicester International has announced the launch of a new one-year fixed-rate bond, which the firm claims will meet the needs of its customers. Read more

Tags: interest rate, best rate, existing alliance, savings bond, alliance and leicester bond, building

BSA: Customers still have “a very wide choice” in mortgage market

Although the range of mortgages available has shrunk in the past year, it continues to be a competitive market where customers still have “a very wide choice,” the Building Societies Association (BSA) has said.

Neil Johnson, PR and policy manager at BSA, said that building societies in particular are offering competitively priced products, which is why they are featuring prominently on the best-buy tables.

A recent survey by Moneyfacts.co.uk revealed that the number of mortgage deals available has dropped by 60 per cent compared to last year.

This may leave many borrowers in financial difficulty about since 1.4 million people are due to come off cheap fixed-rate mortgage deals this year, says the Financial Services Authority.

By the end of 2008 more than 100,000 home owners are expected to be in negative equity, according to the Market Oracle.

Earlier this month HSBC announced that it would match the interest rate of previous deals for two years for borrowers whose fixed-rates were nearing their expiration date.

Commenting on HSBC’s move, Mr Johnson said: “It’s what you would expect in the competitive mortgage market that we’ve got, where providers actually offer different products that will appeal to different customers.”

Tags: manager, month, interest rate, tables.A recent survey, market, mortgage deals, expiration date, rate

Long-term fixed rate mortgages risky because of life uncertainty

Buyers tempted to take out a long-term fixed rate mortgage after chancellor Alistair Darling indicated in this week’s budget that action might be taken in future to promote them should be on their guard.

A number of experts have warned that the certainty that Mr Darling pointed to as the benefit of opting for a mortgage with the interest rate fixed for ten years or more is precisely what is missing.

“Uncertainty is the key deterrent,” Andrew Haggar of Moneyfacts told the Daily Telegraph, pointing to the unpredictability of life circumstances over such a long period of time.

“While borrowers can insure against unemployment and illness, people are still wary of tying themselves to a fixed rate for an extended period of time.”

Nici Audhlam-Gardiner, director of mortgages at Abbey, agreed.

“So much can happen in a quarter of a century, both to a customer’s circumstances and to the economy. While these very long term deals may be suitable to provide long-term stability for a small number of customers – they will not be suitable for all,” she said.

Tags: extended period, budget, interest rate, long period, deterrent

Credit card balance transfers better value than personal loans

Consumers looking to take out a personal loan may want to consider a credit card balance transfer instead, claim financial experts.

According to research from everyinvestor.co.uk, a borrower requiring £10,000 could save over £1,000 over a four year term if they choose to transfer their credit card balance rather than applying for a loan.

Chris Gilchrist, editor with the consumer advisors, said that lenders have raised interest rates on personal loan rates sharply in the past six months.

“Credit card companies continue to offer lengthy zero per cent balance transfers and even though you may pay balance transfer fees, this still works out well below the interest you would pay with a personal loan,” he added.

Industry commentators have predicted the end of the zero per cent interest balance transfer for the past 18 months according to the experts.

However, credit card companies are expected to continue to offer the rate in a bid to attract more customers.

Meanwhile, new research from Fool.co.uk has revealed that up to one in eight credit card holders in the UK have had their credit limits cut.

Tags: Business Finance, interest balance, research, year, industry commentators

Bank has a ‘difficult’ decision to make in slow economy

With inflation rates expected to “creep up over the course of next year” the Bank of England has to make a “difficult decision about interest rates”, according to industry experts.

The Confederation of British Industry (CBI) has said that the combination of inflationary pressure at a time when the economy is slowing will force the Bank to make a decision on what action to take.

Lai Wha Co, principal economist for the CBI, said: “On the one hand it’s monitoring how sharply the economy might slow, but on the other hand it has to weigh up the concerns about inflationary risk.”

She added that if inflation was to rise more markedly than the market forecast then the Bank’s members may be constrained.

The cuts in interest rates that some consumers were hoping for may not be delivered Ms Co concluded.

The CBI has predicted that inflation will rise during 2008 due to the higher price of oil, gas and food.

Tags: forecast, decision, economist, interest rate, time, Monetary Policy Committee

Mortgage tightening to ease next year

The tightening of the mortgage market will ease somewhat going into the new year, according to the Council of Mortgage Lenders.

Sarah Robson, a spokesperson for the trade association, explained that interest rate falls would take some pressure off the market making it less tricky for borrowers to obtain adverse credit mortgages.

Interest rates are predicted to fall to five per cent by the middle of next year, offering some hope to borrowers

Ms Robson explained that homeowners with poor credit history may be able to improve their status.

She said: “If they did have a good credit history for five years straight, that would be taken into consideration – but their previous record would still be there.”

The next decision on the Bank of England base rate, currently at 5.75 per cent, will take place on December 6th this year.

Yesterday, the BBC report that a range of its adverse credit mortgages will be withdrawn today, due to market tightening.

Tags: record, england, adverse credit mortgages, New Year's Day, interest rate, economics, adverse credit mortgages.Interest, council of mortgage lenders

Figures show drop in mortgage lending

There was less mortgage lending last month than in August, according research by the Council of Mortgage Lenders (CML).

Figures revealed a fall of almost 12 per cent in gross mortgage lending in September with the new figure at around £30 billion.

Although a decline is not uncommon for the August to September, this year’s fall is significantly greater than the average of five per cent for the same period.

Michael Coogan, director general at CML, commented: “We have been expecting a slowdown in monthly lending levels in line with interest rate rises.

“In the coming months, we expect to see monthly lending levels dip below their 2006 levels for the first time this year as rate effects are exacerbated by the recent liquidity problems in the mortgage market.”

Despite an annual increase in mortgage lending from September 2006, at 2.5 per cent it is the smallest percentage rise in two years.

The gross lending estimates obtained by CML were taken from its survey of a selection of lenders representative of over 70 per cent of the total mortgage market.

Tags: interest rate, Michael Coogan, percentage, business, cent, August, director general, Council

Millions of Brits to switch credit cards

It is estimated that 6.5 million people in the UK will change their credit card provider in the coming year.

Over half of Brits switch credit cards to profit from interest free introductory offers for balance transfers, according to a study by Abbey.

The figure will see a five per cent increase on changes made last year and represents a total transfer between cards of £11 billion.

Roger Lovering, managing director of Santander Cards Limited, said: “These figures just show the intense competition in the credit card market. With £11 billion at stake, it’s the credit card with the best deal that wins.”

Furthermore, Abbey’s research showed 19 per cent of consumers change cards in order to take advantage of a lower APR.

Six per cent felt that a different card might have more “kudos”.

Mr Lovering added that Abbey offers interest free balance transfers for 12 months, as well as three months of interest free purchases.

Virgin are currently offering 15 months of free balance transfers with a typical APR of 15.9 per cent.

Tags: advantage, card, year.Over half, increase, 5 million

Fixed-rate mortgages on expensive buys

Property investors are advised to take out fixed-rate mortgage when purchasing high-value properties.

According to Bestinvest, when mortgage repayments increase by even a small amount, homeowners paying off debts on a high-value property can find their repayments increasing dramatically.

With any changes to the Bank of England’s interest rate, house prices and borrowing costs are directly impacted. With a fixed-rate mortgage, buyers are not vulnerable to these fluctuations.

Peter O’Donovan, mortgage manager at Bestinvest, advised that young professional first-time buyers should consider a mortgage with a fixed rate: “It obviously is down to the person’s view of risk, and what they have in the background to support their mortgage repayments.

“But in general I would suggest to people borrowing a larger sum for the first time to take a fixed rate, because it’s quite a large part of their disposable income going [towards repayments].”

The latest statistics from the Council of Mortgage Lenders show that 3,000 mortgages worth £250,000 to £500,000 were taken out in July this year by first-time buyers. This represents a rise from January’s figure of 2,000.

Tags: interest rate, risk, Peter O'Donovan, manager, fixed rate mortgage, GBP, figure, first time buyers

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: Morgan Stanley, mortgage, quarterly inflation, percentage, base, inflation

Savers missing out on interest

The Bank of England yesterday (June 7th) froze interest rates at 5.5 per cent but many savers would not have seen any benefit if the rate had risen anyway.

Despite there having been four rate rises since August 2006, the Post Office says that many high street savings providers have not been passing on the benefits.

Interest rate rises are generally viewed as having a negative impact on most people, as those with a loan, mortgage or credit card see their repayments increase.

However, people with savings benefit from a rise in the base rate but only if the provider passes on the new rate.

“Banks and building societies are quick to raise mortgage rates in line with base rate increases, but less inclined to pass on the benefits to their savings customers,” said Richard Norman, head of savings at the Post Office.

“There have been four base rate rises in the last year and the majority of savers have missed out on the full benefit of these.

“Although the Bank of England decided to hold rates today, further rate rises are expected. To make the most of their money, savers need to ensure they check which accounts will consistently pass on rate rises and switch,” he added.

Much like a mortgage with a fixed-rate period, many savings providers offer customers a guarantee that the interest they earn will increase in line with inflation for a specified period of time.

Tags: england, Financial institutions, money, period, interest rate, Post Office."There, mortgage, rate period

Bad credit doesn’t mean bad mortgage

It is something that occupies the minds of many young adults today but a leading mortgage broker claims that bad credit need not mean higher mortgage rates.

London and Country (L&C) claims that 71 per cent of people with credit problems who have visited them have walked away with a mainstream mortgage deal.

This is despite the borrower’s belief that he or she will be hit hard for a previous bad record.

L&C admits that most lenders will not deal with people who have recent defaults and County Court Judgements but points out that the situation is never black and white.

It is possible that some lenders will be more lenient than others and the broker claims that many people with only minor blemishes may be surprised by the kind of deals available to them.

“All too often, people assume that because they’ve had some credit problems in the past, they will have to pay a much higher interest rate and in some cases, high broker fees,” said James Cotton, mortgage specialist at L&C.

“In fact, our research shows that by getting whole of market advice from L&C, borrowers can seek out the best deal for their circumstances and can often secure a better rate than they thought possible.”

The news will be welcomed by first-time buyers, many of whom are of the belief that they will have to wait years until they can get a mortgage.

Tags: situation, best deal, advice, circumstances, interest rate

Rate rise will hurt homeowners

The fallout from yesterday’s (May 10th) interest rate rise is being felt today, with many organisations warning that the increase could leave homeowners in the red.

The Bank of England announced that the base rate would rise by 0.25 per cent, taking it to 5.5 per cent – the highest it has been since April 2001.

Experts are warning that those with a mortgage are likely to suffer the most, especially as more and more people are taking out loans that stretch them to the absolute limit.

As house prices continue to grow and buyers take out mortgages which leave them financially stretched, Citizens Advice is warning that this latest interest rate rise may tip some homeowners over the edge.

“Today’s interest rate rise will put added pressure on some homeowners. Our evidence shows it only takes a very small change in people’s circumstances to tip them from manageable credit commitments into serious debt,” said Peter Tutton from the organisation.

“Citizens Advice is seeing a rapidly growing number of people falling behind with mortgage payments and in some case threatened with repossession.

“Housing debt is one of our fastest growing problems and it increased by 20 per cent in the last year,” he added.

Borrowers are being advised to talk to their lender if they are struggling to make payments, while those considering taking out a mortgage should check thoroughly that they can afford it.

Tags: mortgage, Citizens Advice, interest rate, red, loan, edge, interest rate rise, stretch

Mortgage payments up 15%

Mortgage payments across England and Wales are increasing, leaving many homeowners in a precarious situation.

New figures, published by Woolwich Mortgages, shows that mortgage payments in April of this year reached £590.

That is an increase of £78 on the figure for the same month in 2006 and signals a rise in costs of 15 per cent.

Clearly this is going to have an effect on the financial situation of many homeowners and this is compounded by the fact that household net earnings have only increased by five per cent in the same time period.

Andy Gray, head of Woolwich Mortgages, is concerned that many people will be beginning to feel the pinch, especially if further interest rate rises are introduced.

“Mortgage borrowers are really getting squeezed. With the costs of council tax, petrol, food and drink, as well as mortgages, all increasing, consumers are seeing a large amount of their earnings being diverted to essentials, putting real pressure on disposable income,” he said.

“Most commentators are suggesting that interest rates will increase further this week. However, our research shows that that the three interest rate increases over the last 12 months are already starting to have a major impact on borrowers.”

The figures released for April put mortgage payments at the highest level they have been since Woolwich began collating the data in 2002.

Tags: precarious situation, Impact, commentators, Super jumbo mortgage, interest rate, head, disposable income

RBS launches mortgage options for spring

The Royal Bank of Scotland (RBS) has announced a number of new mortgage offers for the coming season, including a two-year fixed-rate deal at 5.19 per cent.

This package is available to cover up to 75 per cent of the value of a property and charges a product fee of £499. RBS states that this offer will suit homeowners and remortgage customers who like to know what their monthly repayments will be.

A two-year base-rate tracker mortgage has also been unveiled, currently priced at 4.95 per cent – 0.3 per cent below the Bank of England base rate – with a fee of £999.

Completing the new portfolio of products is a deal for people who have already paid off a chunk of their mortgage. This offer is available with a two-year fixed interest rate of 4.99 per cent, for loans covering up to 50 per cent of the value of a home.

This package is only available to existing RBS current account holders.

Darrell Evans, commercial and product director for RBS Mortgages, said: “With some uncertainty on what will happen to interest rates, home buyers and remortgagers will be looking for the best deal possible.

“We’ve provided a great choice of competitive deals to match the needs of either first-time buyers, switchers or those remortgaging.”

Tags: remortgaging, Royal Bank of Scotland, best deal, RBS launches mortgage, new mortgage offers, interest rate, bank of england base rate, economics

New buyers will feel pinch

First time buyers will be adversely affected by recent interest rate rises, says the Royal Institution of Chartered Surveyors (Rics).

The organisation believes that people taking their first step onto the property ladder are likely to fall behind with mortgage repayments as a result of the rise.

Conversely, Rics points out that buy-to-let investors are less likely to suffer the same fate, with age being cited as one of the key factors.

Figures show that those with a buy-to-let mortgage are generally older and have more disposable income, making them more secure in the market.

Rics says that 0.96 per cent of all mortgages in the UK are in arrears, with only a tiny percentage of these being buy-to-let properties.

“Buy-to-let investors will be less at risk from repossessions in the coming months,” said David Stubbs from Rics.

“Older, wiser investors are likely to ride out periods of interest rate rises looking to the benefits of long term capital growth rather than short term rental income.

“January’s surprise interest rate rise is likely to soften new buyer enquiries in the coming months but those buyers who have already taken the housing market plunge could find mortgage companies knocking at their doors in the near future as affordability conditions bite.”

Tags: ladder, interest, interest rate rise, interest rate, future, Business Finance, periods

Helpful hints for Christmas recovery

Consumers are being offered advice on how to overcome the financial difficulties that we all inevitably experience during January.

Which? says there are a few simple steps which can be taken to avoid allowing a debt molehill to turn into a mountain.

One piece of advice is to buy things on a credit card which charges zero per cent on new purchases, but ensure the balance is paid back before standard interest rates kick in.

Which? also says it may be a good idea to transfer debt from one credit card to another, taking advantage of a new interest-free period, but the firm urges caution when moving money in this way.

“Many of us will have overspent over the festive period, or be planning large purchases in the January sales, so it’s a good time to sort out our finances,” said Malcolm Coles, editor at which.co.uk.

“It’s really important to shop around to make sure that you get the best deal on credit.

“For those who already owe money it’s very easy to transfer existing card balances to a credit card with a lower interest rate, but consumers should check the terms and look out for transfer fees to make sure that they know how much it will really cost them,” he added.

Which? also advises consumers that they should only ever secure a loan against their home as a last resort.

Tags: interest rate, credit, Credit card, molehill, simple steps, finance, firm urges caution, consumers

Wedding Loans

To Have and to Hold

Potentially, your wedding day is the best day of your life. Whether you are going for an elaborate set up with all the relatives and friends you can muster or a quiet, simple ceremony, getting married can be very expensive. And that’s not counting the honeymoon! The average wedding in the UK today costs £15,000. Read more

Tags: guess, interest rate, groom, wedding loans, \, Loans