UK interest rates rise to 4.25%/4.50%/4.75%

Society Business and Career
1

Looks like a temporary respite. The surging house prices are going to force the BOE to raise rates again sooner rather than later.

UK interest rates on hold at 4%](BBC NEWS | Business | UK interest rates on hold at 4%)

UK interest rates are to remain on hold at 4%, the Bank of England has said.
Economists said the Bank’s decision to resist a third rate rise since November was finely balanced.

Manufacturers had argued against any fresh rise, saying it would damage their prospects, particularly in light of the recent strength of the pound.

But galloping house prices and surging consumer debt suggested a rate rise to moderate the boom was being delayed but not cancelled, economists said.

The Bank’s decision was welcomed by business groups, with the British Chambers of Commerce saying it was the “preferred choice”.

Steve Radley, chief economist of manufacturers’ association the EEF, said: “Two rises in three months would have poured fuel on the fire of expectations of further rises to come, potentially pushing the pound to damaging levels against the dollar.”

He said the Bank could afford to wait to assess the impact of the past two rate rises on the economy.

2

So do I get my Isa for this tax year now or wait a bit?

3

[QUOTE]
*Originally posted by Shahreen: *
So do I get my Isa for this tax year now or wait a bit?
[/QUOTE]

What has ISA got to do with a rise in interest rates?

4

Erm because it's nicer to fix your Isa at a higher rate maybe?

5

I thought you would get the benefit of higher rates on your ISA regardless of when they come. Also depends how much of your ISA is in interest rates instruments and how much in other type of investments.

6

Consumers face pinch as Bank raises loan rate](http://money.telegraph.co.uk/money/main.jhtml?xml=/money/2004/05/07/cnrates07.xml&menuId=242&sSheet=/money/2004/05/07/ixcity.html)

The decision of the Bank of England’s Monetary Policy Committee to increase rates by a quarter of a percentage point to 4.25 per cent was a further warning to borrowers who have racked up record levels of debt.

Two similar rises since November have failed to cool a boom in house prices and a rise in credit levels. Financial markets expect rates to reach more than five per cent by next year.

Unrest in the Gulf and the Middle East pushed oil prices to 13-year highs this week, with Brent crude rising above $37 a barrel at one stage in London yesterday.

Tony Blair voiced concern that increased oil prices could stifle economic recovery.

He said the Government was “looking carefully” at the increase, because higher oil prices could have a “severe” impact on the world economy. Motorists are braced for petrol prices to go even higher after a litre of unleaded moved beyond 80p last week.

The Treasury made clear last night that there were no plans to postpone a 1.42p a litre increase in petrol and diesel duty in line with inflation from Sept 1.

Mortgage lenders began to raise their lending rates immediately after the committee’s decision.

Abbey was the first major lender to pass on the increase, raising its standard variable rate from 6 per cent to 6.25 per cent. A £50,000 loan from Abbey, which holds 12 per cent of the mortgage market, will cost £10.41 more a month.

Cheltenham & Gloucester, which manages all Lloyds TSB mortgages, also raised its rate to 6.25 per cent. Other lenders said their rates were “under review”.

The internet bank Egg and Tesco Personal Finance passed on the full 0.25 per cent increase to their savers, although Egg said its mortgage rate was under review.

The rate rise was widely anticipated in the City following the Bank’s admission last month that increases in November and February had not yet had an effect on the wider economy.

The MPC said the rise was needed even though inflation remained low at 1.1 per cent.

In a statement accompanying the decision, it said: “Inflation has been below the two per cent target and is likely to remain so in the near term. But earnings growth has picked up and commodity prices have risen sharply.”

Mervyn King, the Bank’s governor, has urged consumers to think before taking on more debt. Some households are expected to suffer negative equity - where their mortgage exceeds the value of their property - as loan costs increase.

House prices are nevertheless expected to rise further this year. Halifax said this week that the annual rate of house price inflation last month was 19.1 per cent.

Mortgage lending rose by £9.34 billion in March. There was also a £963 million increase in credit card borrowing, leaving a collective £54.03 billion plastic debt.

7

i hope the housing market colapses that would be so much fun :p. ameen

8

Waleed.... what would you possibly gain by wishing THAT??
Sounds to me like sour-grapes from someone who didnt get their foot on the property ladder in time.
Oh dear, Oh dear, Oh dear!!!

9

Well said AnokhaUK

10

anokhauk unkil do u really think that at 19 i would want a house :p .

brit chick anty i hope ap mayaray sath bhi han main han milain ge.

all the same i hope the housing market colapses wil be fun to see the effects no?

11

The rates have gone up again today by another 1/4 point to 4.50%. This is bad news for home owners as repayments are going to go up. Will it cool the housing market. Remains to be seen.

12

UK interest rates rise to 4.75%](BBC NEWS | Business | Bank lifts interest rate to 4.75%)

**The Bank of England has raised interest rates by a quarter of a percentage point to 4.75%. **

The move, widely predicted by analysts, comes amid evidence of a surge in economic growth which could fuel inflation in the months ahead.

The rate rise will also be seen as an attempt to cool the UK’s booming property market, and rein in soaring consumer debt levels.

**The Bank has now pushed through five quarter-point rises in eight months. **

The latest increase means higher repayments for businesses and consumers who have borrowed money, including Britain’s millions of mortgage holders.

It also means that savers will get better returns on the money that they put aside.

Business groups said the rate rise could hamper British companies’ performance, and called on the Bank to hold fire in the months ahead.

Easy does it

“Interest rate overkill would have damaging consequences,” said David Frost, director general of the British Chambers of Commerce.

“We urge the Bank to take the concerns of UK business fully into account in its future deliberations.”

Manufacturers’ association EEF said the increase would put companies already facing higher costs because of soaring oil prices under added pressure.

“Manufacturers will now expect a pause for breath to assess the impact of the recent rises at a time when they are faced with rising costs for energy and other raw materials,” EEF Director General Martin Temple said.

Recent economic data suggest that previous rate increases this year have had little impact on household spending and borrowing.

Retail sales rose by 1.1% in June, and total consumer debt breached the psychological £1 trillion barrier last month.

And while there have been tentative signs that the UK’s 10-year property boom is coming to an end, the most closely-watched surveys show that house prices are still rising, albeit more slowly.

The Bank of England does not target house prices, but it is concerned that unless the property boom is brought under control, the market could crash, triggering a full-blown recession.

It hopes higher borrowing costs will deter would-be homebuyers from taking on mortgage debt, bringing about a gradual slowdown in house price growth.

13

Not good for share bazaar Ehsan bhai.

14

Come on housing market!!! Collapse!!!

It’s so discouraging to get my first job and then find out that a house, or even a modest flat, costs around 9 times my net salary and that a mortgage on that would be extortionate.

I need about a 25% to 35% collapse in the UK housing market at least in order to afford a house. 50% would be nice but I guess that’s a pipe dream :bummer:

In the mean time, I’ll continue to bum a living on my own in my parents home while they live abroad :hehe:

15

^ so you are advocating a housing market collapse??? LEt's see, personal equity gets diluted, outstanding loans become highly leveraged, people need to scurry around and cut costs, that means less stuff to buy from P&G, that means P&G's management comes under margins pressure, P&G management cuts jobs. IT is a cost center, IT jobs go first. Mad Scientist moves in with his parents abroad once his position is eliminated. Still Cheering for a collapse?

16

^^

Actually, over the past 40 years the consumer goods sector is one of the ones that gets least affected by economic downturns. In fact, during past economic slumps in the US market, you find that shares in P&G and its competitors tend to stay even or even rise, because they get viewed as a safe bet.

People do, after all, still need to buy washing poweder to clean their clothes even if jobless; they still need toothpaste, still need soap, still need shampoo, etc.

My employers can take a hit in the economy more comfortably than most other companies can, and has done so in the past - P&G has never laid off employees during an economic slump in the past.

So, definately being able to afford a house vs a tiny tiny chance of losing my job in a UK market collapse - I know which I would prefer.

17

Wow, you are a capitalist. So all this talk abou the islamic economic system etc is just drivel then? good good!!

while you can espouse the notions of soft goods sector being immune to recessions, the companies still work for the almighty shareholder. The reason your company has managed to avoid the layoffs is more due to divestiture of certain product lines and automation of the sales and marketing engines not because in an ever competitive industry demand grew. Process efficiencies, now completed on the front end will need to continue to ensure earnings growth, that means mere laal, that your silly coding job or whatever is it that you do, is not a right but a happenstance. So trad carefully down the path of home equity because even a 30 yr motgage from Mullah bank will mean higher interest rates (cost of capital) whatever you want to call it these days, to make up for their losses in other industries because of people working at Boots whoa re losing their jobs.