UK NEWS
INTEREST RATES TO GO EVEN HIGHER
Home owners face more misery
By Graham Hiscott and Sarah O'Grady
HOME owners were last night warned to brace themselves for another punishing rise in interest rates.
Millions are still reeling from the Bank of England’s decision less than a week ago to raise the cost of borrowing to 5.5 per cent.
But the Bank’s Governor, Mervyn King, yesterday signalled that another increase was on the way to attempt to keep a lid on inflation – although the rate of price rises is already starting to slow down.
Experts said the next quarter point rise in interest rates to 5.75 per cent could come as early as next month.
Rates are already at their highest level since April 2001 following the fourth rise in the past 10 months. Since last August, average monthly mortgage bills have soared by £63.79 a month to £738.99.
Karen Darby, chief executive of the price comparison website http://www.Simplyswitch.com, said: “The prospect of yet another rise will send shudders up the spine of Middle Britain. Home owners will be left wondering when it will end."
Citizens Advice policy officer Peter Tutton said: "We are already seeing a rapidly growing number of people falling behind with mortgage payments and, in some cases, threatened with repossession.
"We also know some people are taking on mortgages that stretch them to the absolute limit.
"Any increase in interest rates could spell disaster for people whose finances are balanced on the very edge of affordability. Many more people could now be pushed over that edge." The Bank of England's Monetary Policy Committee is under pressure to curb inflation.
But the Consumer Prices Index, the Government's chosen measure of inflation, fell from 3.1 per cent in March, its highest level for 15 years, to 2.8 per cent in April, the Office for National Statistics said this week.
The more comprehensive Retail Prices Index, which includes housing costs, stood at 4.5 per cent in April, down from 4.8 per cent the previous month.
However, inflation remains higher than any other major European economy - and way above the Government's target of two per cent - and a key quarterly report from the Bank of England yesterday hinted that interest rates may need to rise to 5.75 per cent to keep it under control.
One of the biggest factors is uncertainty over gas and electricity prices. Bills have begun to fall but there is concern that could change.
British Gas said this week that prices may have to rise if wholesale gas became more expensive.
Mervyn King said: "CPI inflation is likely to fall back further over the next few months but the crucial question is where inflation is likely to be once energy prices have settled down."
He added: "Overall, the balance of risks to inflation is, in the Monetary Policy Committee's judgment, on the upside. The committee will monitor those risks carefully."
Philip Shaw, an analyst at Investec, said: "Overall, the inflation report strengthens our view that base rates will rise again to 5.75 per cent.
"Given the importance of inflation expectations and a possible need for a prompt signal of its intentions to meet the two per cent target, we suspect that the monetary committee will not wait until August to tighten again, and we continue to pencil in July for the next move. We would not rule out June."
Andy Gray, head of Woolwich Mortgages, said: "Mortgage borrowers are really getting squeezed.
"With the costs of council tax, petrol and 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."
What do YOU think? Is the housing market ruining our economy? Comment NOW on Have Your Say.
Video 
INTEREST RATES, THE SCENARIO?
17.05.07, 11:46pm
Even a false housing market stimulated by the governments open door policy on immigration and therefore, the demand for housing has it's limits!
Think of this scenario?
A private members club is not doing much trade, the committee, (the government) decide to open it's doors to non members, (immigrants and migrants) Trade becomes brisk and profitable and everyone is happy. The down side is the price of a drink (housing) goes sky high due to the demand.
Eventually, the customers have to stay at home because the prices have gone too high!
The club have an emergency meeting and elect a new chairman (Brown) but by then it is too late! The club is facing bankruptcy (UK) As a last resort, the committee try giving away free drinks (housing benefit) and the price of drinks falls dramatically (housing) but it's too late the club has to fold!
Simply a bit of humour, but it makes you think!?
• Posted by: steveg • Report Comment
WHATS THE SUPRISE?
17.05.07, 6:13pm
Going up? They'll go up even more. How else can Saint Gordon pay for all this Foreign Aid he keeps pledging to Africa! Then on top of that little chestnut we have the Corruption of the EU to pay for don't we??
• Posted by: saxon • Report Comment
INTEREST RATES TO GO EVEN HIGHER
17.05.07, 2:14pm
Interest rates to go even higher.
The rise in Interest rate has nothing to do with the housing market, its just another excuse to RIP US OFF. Think about it - who decides on the value of your property. Its all big business that goes on with property tycoons that drag the ordinary house owner into the equations. Wish we was in the Euro then the Banks would have big competition to offer lower rates of 3% or become a Muslim and get interest free loans.
Unfortunately I am British and have to be RIPPED-OFF ALL THE TIME.
• Posted by: Save_Britain • Report Comment
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17.05.07, 11:36am
Interest rates will still be historically low at 5.75%, the problem is people have been encouraged to stretch to buy houses with the promise that prices will boom forever more.
• Posted by: Simon1 • Report Comment
INTEREST RATES
17.05.07, 9:39am
The housing market is only part of a very complex picture. The pressure on our interest rate also come from the international money markets and the foreign investors. Brown has pushed up public borrowing to over 1.25 trillion pounds. This figure is mind blowing given the trading balance with the rest of the world. When did anyone hear the balance of trade figures read out on the news NEVER ! and for very good reason we are losing money hand over fist every month. Brown has lied and we do not have a strong economy just one huge credit card bill that will have to be paid by future generations.We have had SPIN! for ten years now and it seems set to continue.
• Posted by: kenherts • Report Comment
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