Over the last 18 months we have seen five quarter point interest rates rises such that the bank of England base rate is currently 5.75%. Many experts have speculated that we could see interest rates rise to 6% but the opinion has started to change and the general consensus in the City is that next year interest rates may fall to as low as
5%. It is hard to say when the first rate decrease may happen but I think it will be early next year either March or maybe even February. I think the fall will be gradual by quarter percentage points. Why will this rate fall happen, well the Bank of England has achieved many of its objectives and now it may be time to balance the markets again.
The property market has slowed with the interest rate rises but UK exports have also slowed due to the strong £ which makes our exports very expensive which has hit UK businesses. The one thing that could prevent a rate fall would be the price of oil which looks like it will continue to increase.
However, even if the Bank of England base rate falls it does not mean that the UK mortgage lenders will reduce their standard variable rates! The LIBOR rates are still high and as the credit crunch takes effect lenders may not want to stimulate the market as they don’t want to lend until the full implications of the American Sub Prime market collapse are understood. We may still have more Northern Rockiness ahead.
For more information about the UK property market in 2008 and how it will impact on you and tour investing strategy why not come along to the PIN January network meeting in Birmingham on Tuesday 15th January and in London on Tuesday 22nd January. Reserve you place now on the PIN website.