Interest rate will not exceed 5.75%

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by Kay Murchie

According to mortgage advisor John Charcol, the recent decision to retain the base rate at 5.75% was not a shock, however, the company claims it is waiting in anticipation for the minutes from the committee on October 18 to gain a better insight in to the Bank’s ideas on the matter.

A spokesperson for John Charcol said it is anticipated that the Monetary Policy Committee (MPC) will have discussed the possible need to cut the Bank Rate sooner than previously anticipated. Their response to the credit crunch will be particularly interesting added John Charcol.

In addition, Nationwide, the mortgage lender, is also forecasting that interest rates will now peak at 5.75% as the threat from the slowdown in the US economy increases and inflation eases.
The prediction came in spite of the Nationwide’s latest survey showing that house prices increased an average of 0.6% across the UK in August, up from 0.1% in July.

A spokesperson for the Nationwide commented that the risk of sharp slowdown in the US, a tapering off in inflation in the UK and weaker growth in neighbouring economies in Europe have all increased the chance that the Bank of England will not increase rates to 6%.