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Interest Rates Should Remain Steady Until 2012

by Jim ONeil on August 7, 2011

in uk banks

The BBC recently polled 32 economists regarding UK interest rate movement and a majority of them predicts that rates will remain unchanged until 2012. Three of them estimated that a rate increase would not occur until 2013.

However, over half said the Bank rate would increase to 1.5 percent or higher before 2012 ends.

For over two years, the Bank rate has held at a record low. The 0.5 rate has disappointed many savers but has kept mortgage loans cheaper, allowing those under heavy financial pressure to continue making mortgage payments.

The Bank of England Monetary Policy Committee July meeting minutes reveal a seven to two vote in favor of keeping the Bank rate at 0.5 percent.

According to policymakers, a weak economy has reduced the chance that interest rates will increase over the short-term. Six of the 32 economists polled by the BBC said that rates would begin increasing in fourth quarter 2011.

Twelve said this movement would not occur until first quarter 2012. The most long-term prediction was from one economist who said rates would not change until second quarter 2013.

The widespread view of unchanged interest rates has led loans APR to fall. A drop in swap rates is partially responsible for the falling cost of fixed-rate mortgages. Moneyfacts, a financial information service, reported that the average fixed-rate five-year home loan has dropped to 5.02 percent, which is the lowest since the credit crisis began.

The low Bank rate has caused some groups to take action. Save Our Savers, a campaign group, asked members of the Bank of England rate setting committee to increase the bank rate to encourage saving and assist pensioners. It reported that UK savings value has declined by £50 billion within the past year due to low interest rates and high levels of inflation.


dude……. seriously you are acting like that site is your life. Lame.

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