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: record low level, target, order, government, inflation, base interest rate

Pressure on interest rates stems from inflation

Many borrowers with variable rate mortgages or loans could see their monthly repayments rise over the course of this year, as the pressure is piled on for the Bank of England and the Monetary Policy Committee to increase the base rate in order to keep a lid on inflation. The level of inflation has now soared to 3.7 percent, which is close to double the target level of 2 percent as set by the government.

There are now concerns that the MPC will have to make the difficult decision to increase the base rate so that inflation can be brought back under control. The base rate has been at an all time low of just 0.5 percent for nearly two years now, and this has brought welcome relief to many people with variable rate loans and mortgages, as it has resulted in their repayments coming down.

It is thought that inflation could continue to soar, and this rise in inflation will not be helped by the increase in VAT, which rose to 20 percent at the start of this year reflecting an increase of 2.5 percent. A number of other things were blamed for the increase in inflation, including food costs,  higher utility bills, soaring fuel prices, and air transport.

One economist said: “Despite the undeniably significant risk to growth coming from the fiscal tightening that is now increasingly kicking in, there is mounting pressure on the Bank of England to enact at least a token near-term interest rate hike to send out the message that it has not taken its eye off the inflation ball.”

The British Chambers of Commerce warned: “Raising rates at a time when fiscal policy is being tightened, while businesses and individuals are facing greater pressures, would be a mistake and should be avoided.”

Tags: significant risk, relief, air transport, Business Finance, inflation ball, variable rate loans, policy

Hips may be universal by October

The Association of Home Information Pack Providers (Ahipp) is calling on the government to extend the introduction of Home Information Packs (Hips).

Officials at the organisation say that Hips could be applied to homes with three bedrooms or more from September and the rest of the market could follow just one month later.

The government was forced to announce that Hips would only be introduced to the home-selling process for properties with four bedrooms or more from August 1st after concerns about there being too few accredited energy assessors available.

However, Ahipp says that there are plenty of accredited energy assessors available now and even more on their way.

“According to our own research, in addition to the 1,340 accredited assessors, there are a further 1,200 assessors who have applied for accreditation and will be fully accredited by the end of July,” said Paul Broadhead, deputy director general at Ahipp.

“With this in mind, government will easily meet the 2,000 target that it suggests is needed to provide Hips for homes with three bedrooms or more.

“As a result, I see no reason why, in line with its implementation plan, government could not introduce mandatory Hips for three bedroom properties from September, with the rest of the housing stock soon to follow, perhaps as soon as October,” he added.

Mr Broadhead went on to say that he fully expected Hips to be mandatory in the home-selling process for all properties before the end of the year.

Tags: target, August, energy, month later.The government, information packs, information

Protect your expensive wedding gifts

A new report has highlighted the importance of home insurance for newly weds, citing the cost of ever extravagant wedding gifts as the main reason for needing to get home insurance cover pretty much right away following the wedding.

According to reports wedding gifts are getting more and more extravagant, and with gifts as expensive and luxurious as plasma screen TVs and the like being purchased as wedding gifts in some cases, home insurance cover is more important than ever for newly weds with thousands of pounds worth of presents.

Research was carried out by NFU Mutual, which showed that under ten percent of newlywed couples actually check their insurance policies immediately after the wedding, which means that millions of pounds worth of extravagant wedding gifts could be at risk, as it could be left in the new homes of newlyweds as they jet off to enjoy their honeymoon still caught up in the excitement of the wedding.

Research also showed that many newlyweds couldn’t remember whether they had checked their policies or not following the wedding. Officials reports that millions of pounds are spent on wedding gifts each year in the UK, and those gifts could be at risk from damage or theft – particularly if they are being left in the house whilst the couple go on honeymoon – which could mean huge financial losses for the newlyweds just as they embark upon their married life together.

One official from NFU Mutual stated: “There is a great deal of excitement in the run up to a wedding and naturally, the practicalities of checking your home insurance can sometimes be forgotten.”

Tom Smith
31st May 2007

Tags: target, break, value, steal, increase, wedding, in, burglary

Bank was split over rate rise

The recent freezing of interest rates caused a split within the Bank of England, with two Monetary Policy Committee (MPC) members voting in favour of a rise.

Minutes of the meeting in February have revealed that the vote was split 7-2 in favour of freezing rates but the divide means that the future for borrowers remains uncertain.

Those with a mortgage, credit card or loan could still see interest rates rise, with many people likely to suffer as a result if they do not have the financial clout to withstand another increase.

MPC members decided to wait and see what effect the previous three rate rises would have before moving ahead with another.

“It would take some time for the full effects of the past tightening to be seen. It was difficult to judge whether, and if so by how much, policy might need to be further tightened to keep inflation on track to meet the target,” the minutes read.

The previous rises came in quick succession, with rates jumping from 4.5 per cent in August to 5.25 per cent in January.

It appears that interest rates are likely to rise again in the coming months as the MPC attempts to bring down inflation which is currently running well above the government’s target of two per cent.

Tags: succession, RPIX, Consumer Price Index, rates, interest rates, interest, clout, target