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uncertainty in the markets does not directly affect anybody
who has taken out a fixed rate mortgage, however there are
expected to be many thousands of people who were on a five
year fixed rate mortgage deals that may have enjoyed
interest rate payments of 4% that will becoming to the end
of their terms. This will mean that the mortgage interest
rate changes will be delayed and this could cause an
additional spending reduction in the future, thus putting
even more pressure onto the markets. Looking to the future
the direction that the interest rates go will depend on the
forecasts for inflation and economic growth. The target for
inflation for the Monetary Policy Committee is for 2%, if
inflation rises above this level then there will be
significant pressure on the bank of England to increase the
level of interest rates to reduce spending and stabilize the
economy. There is however a number of factors that could
suggest that the UK rates have peaked and the interest rates
will fall again. The supply and demand factors will come
into effect, with the number of mortgage approvals having
fallen and with the US problems along with the credit crunch
people are finding it harder to obtain credit. The fewer
people who are getting mortgage approvals or moving home
this will start to push the house prices down again,
likewise so can increasing interest rates, in the early
1990s interest rates were at 15% which caused the housing
market to collapse. The markets are facing a period of
uncertainty and many people will be keeping a very close eye
on what the next move will be. |
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