Monthly Archives: November 2013

Interest RatesMore UK lenders preparing for SVR hikes

A number of mortgage lenders have approached the Financial Conduct Authority to discuss possible changes to their tracker mortgage contracts, the regulator has revealed.

FCA supervision director Clive Adamson has written to banks and building societies outlining their responsibilities ahead of any variation to their standard variable rates or other contract terms.

He said: “A number of mortgage lenders have engaged with us recently about changing their mortgage contracts, particularly on SVRs.

“We are writing to clarify our position on how you should engage with us if you want to change your SVR and remind you of the relevant regulations and rules that apply.”

Mortgage lenders do not need to notify the FCA before changing their SVRs, he said, but they must be able to show they have complied with regulation.

Bank of EnglandBank of England governor Mark Carney says there is a 40 per cent chance his threshold for interest rate rises could be met by the end of next year.

Under his forward guidance plans, unveiled in August, Carney said interest rates should not rise until unemployment falls below 7 per cent unless inflation was consistently above 2.5 per cent.

In the Bank’s quarterly inflation report, published today, Carney says there is a two in five chance the threshold could be reached next year, a 60 per cent chance by 2015 and a two-thirds chance by the end of 2016.

It is a significant shift from August forecasts when the Bank gave a 25 per cent chance of meeting the threshold by the end of next year.

The Bank had previously forecast a 40 per cent chance of unemployment falling below 7 per cent by the end of 2015, rising to a 50 per cent chance in early 2016.

Office for National Statistics data, published today, shows unemployment fell to 0.2 per cent to 7.6 per cent in the three months to September.

Interest rates have remained at record lows of 0.5 per cent since March 2009 with former Prime Minister John Major this week suggesting they should rise to 5 per cent to help savers.

 

5 year fixedWith the UK economy growing faster than expected this could push forward the first base rate hike by as much as 12 months, economic forecasters say.

Borrowers considering taking out a five-year fixed should consider this sooner rather than later as anticipation of a rate hike grows.

There is a one in five chance that unemployment could fall to 7% in the first half of next year, which is one of Bank of England governor Mark Carney’s trigger points for hiking base rates from today’s 0.5%, according to the National Institute of Economic and Social Research.

But it admits there is “considerable uncertainty” about the rate at which unemployment will fall. Its best guess is that the level could get 7.4% by the middle of next year, down from today’s 7.7%.

Some are forecasting a rise in interest rates in the second half of 2015.

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BOEThe Bank of England has left interest rates unchanged at 0.5% and made no increase to its quantitative easing.

The decision has come as no surprise as the Bank has said it will not consider a rate rise until the unemployment rate falls below 7%.

The Bank of England’s Monetary Policy Committee (MPC) has kept interest rates on hold at 0.5% since March 2009.

Under the Bank’s policy of forward guidance, brought in under new governor Mark Carney, it has said it will not increase interest rates until the rate of unemployment has dropped below 7%.

When the Bank first announced this, in August this year, it said it did not expect this to happen until 2016.

However, many analysts believe that the Bank will have to act sooner than that – possibly in 2015 – given the increasing strength of the UK’s economy.

The last set of unemployment figures showed the jobless rate had dropped to 7.7% in the June-to-August period.

The economy grew by 0.8% in the third quarter of the year, and recent economic surveys have indicated that growth remained strong in October.