The Bank of England cut interest rates to a new record low of 1% on Thursday. While the Halifax reported that house prices rose 1.9% during January. This is in contrast with Nationwide’s figures last week which showed 1.3% drop in house prices. As the credit-crunch has shown, the supply of finance has driven up house prices. There will be no full scale recovery in the UK property market until finance becomes easier to obtain, especially for first-time buyers. And with rising unemployment, who knows what the future will bring!
Archive for the ‘Bank of England’ Category
Base rate falls while house prices rise
Friday, February 6th, 2009Bank of England holds rates steady at 5%
Thursday, September 4th, 2008
The Bank of England left interest rates on hold at 5.0 percent for a fifth month running on Thursday. Given the speed and scale of the economic slowdown, however, most are convinced a rate cut is just a matter of time. Britain’s economy failed to grow in the second quarter of this year for the first time since the early 1990s and many analysts believe the country has already tipped into recession. With unemployment rising and real incomes falling, consumer confidence is at rock bottom and retailers are feeling the pinch.
Bank holds base rate held at 5%
Friday, July 11th, 2008The Bank of England held interest rates steady at 5.0% on Thursday, in a widely expected decision as policymakers tussle with the twin evils of a slowing economy and surging inflation. By keeping rates on hold this month, the Bank is buying itself a little more time to see what interest rate path is required to bring inflation back close to the 2% target from the current 4.1% over the medium term.
Inflation rockets to a record 3.3% high
Wednesday, June 18th, 2008The Consumer Price Index (the cost of living) rose by 0.3 percentage points to 3.3% during May - the highest reading since the measure was first reported in January 1997. Previous comparable annual inflation readings were last as high in July 1992. The rise above 3.0% meant the Bank of England Governor, Mervyn King had to write an open letter to the government explaining how the central bank would bring inflation back to its 2% target. Mr King added that inflation should peak to around 4% by the end of the year and begin to fall back towards its target “in the absence of further unexpected increases in oil and commodity prices”.
Read the letter from the Bank of England and the Chancellor’s response for more details.
City predicts imminent base rate rise
Thursday, June 12th, 2008The City is betting on the previously unthinkable prospect of interest rates rising within months. Investors are gambling that rates will have to increase from the current level of 5% to bring inflation under control. Most had previously expected rates to fall to about 4.5% by the end of the year. Investors now fear that at least two, and possibly even three, quarter-point base rate increases are on the cards. City economists said that at the very best all hopes of an interest rate cut this year are now out the window.
Lenders raise rates despite cut by the Bank
Saturday, April 12th, 2008The Bank of England cut its base rate by o.25% to 5% on Thursday to stop the economy’s slide towards recession. However, relief for home owners was instantly undermined by a new wave of mortgage rate increases from Britain’s biggest lenders. Many lenders are yet to pass on the recent base rate reductions - instead they are busy increasing rates, demanding larger deposits, tightening lending criteria and, in some cases, withdrawing deals from the market altogether. Most of the big lenders, including Halifax, Nationwide, the Woolwich, Cheltenham & Gloucester and First Direct also said within minutes of the Bank’s announcement that they will be cutting their standard variable mortgage rates by the full 0.25%. Both Nationwide and Alliance & Leicester are believed to have been overwhelmed by applications from borrowers coming off cheap fixed deals and want to choke off the demand with yet another big increase of upto 0.35% in less than two weeks. The increases followed similar moves from Woolwich, Halifax and Abbey.
Has the Bank of England lost control?
Thursday, April 10th, 2008Some are questioning whether the financial turmoil has rendered the Bank of England powerless to direct how much the biggest financial names on the High Street charge for credit and pay customers for their deposits. For many, today’s predicted cut in base rate will be meaningless. While banks and building societies have been cutting savings rates, they have also been raising mortgage rates for new borrowers. The only people to benefit would be existing mortgage customers on the track rates which follows the movement of the base rate. The current market turmoil could however be providing banks and building societies with the opportunity to rebuild their profit margins after being hit (at various levels) by the subprime market. Once again, the consumers are paying for the cost of the financial industries’ imprudence.
Feds slash rates to 2.25%
Tuesday, March 18th, 2008Today, the US Federal Reserve slashed interest rates by 0.75% to 2.25% in a desperate attempt to prevent meltdown in the financial markets. The decision followed the weekend bailout of Bear Stearns, which was saved by rival JPMorgan Chase with the help of Fed cash. The shocking demise of Bear Stearns has prompted fears on Wall Street and in the City that the credit crunch could claim yet another high profile victim as lending between banks dries up. The Fed had previously cut rates by 1.25% to 3% this year alone and pumped billions of dollars into the markets. Although this has so far done little to restore confidence or calm. There are great concerns that the Fed and other central banks are powerless to solve the crisis. Pressure is now growing on the Bank of England and European Central Bank to cut rates, although both are concerned about rising inflation. Official figures released showed that inflation in Britain rose sharply in February from 2.1% to 2.5%, leaving the City split on the Bank of England’s next rate call.
Bank keep rates on hold at 5.25%
Thursday, March 6th, 2008The Bank of England’s Monetary Policy Committee (MPC) decided to keep interest rates on hold today at 5.25%. A decision which is in line with market expectation and predictions. It made no statement to accompany its decision but policymakers had been suggesting the bank had to balance the demands of slowing growth and rising inflation. Soaring oil prices and the rising cost of food is putting a huge pressure on inflation around the world. The policymakers are concerned that inflation could rise to around 3% in the coming months which will require the central bank Governor, Mervyn King to write an explanatory letter to the government. However, economists are predicting further interest rate cuts in the coming months.
Base rate held at 5.5%
Saturday, January 12th, 2008
On Thursday, the bank kept rates on hold at 5.5% despite pressure to cut rates after increasing signs of a consumer spending slowdown. But most economists believe that this decision makes the need for a cut next month, all the more pressing. But the MPC is charged with keeping a lid on inflation which is currently running at 2.1% instead of it’s 2% target.
