Loans. Mortgages. Credit Cards. Interest Rate Rises Around The Corner.
Below is a MRR and PLR article in category Finance -> subcategory Other.
Loans, Mortgages, Credit Cards: Interest Rate Hikes on the Horizon
Summary
Financial experts in the City anticipate interest rates will increase by half a percent by the end of this year. The Bank of England typically opts for incremental changes, so expect a 0.25% hike around August.
The Current Landscape
Interest rates for fixed mortgages are already climbing. Two-year fixed rates range from 4.15% to 4.48%, while three-year fixes are between 4.49% and 4.64%. Credit card and loan rates, being mostly variable, will likely rise swiftly after the Bank of England makes its move.
Understanding the Shift
Just a month ago, there was talk of potential rate cuts. What changed? Inflation is once again a concern. The government's inflation target is 2% annually, but with rising energy costs, economic pressures are mounting. Despite higher fuel bills, new car registrations increased by 7% year-over-year in March, industrial orders grew over 13%, and business confidence improved in April. Even in the U.S., there's unexpected economic activity.
Positive Economic Indicators
This environment has some upsides for the UK economy. Exports are increasing at almost a 20% rate, closely followed by imports. A major economic survey forecasts ongoing robust growth.
Impact on the Housing Market
For most people, the housing market is a key economic indicator. Currently, it's thriving. In the first quarter of this year, Halifax reported a 1.6% rise in house prices, with Nationwide showing a 2.3% increase. However, these are averages and vary by location. Rightmove data reveals record-high average asking prices, led by a mini-boom in the high-end market.
Potential Challenges Ahead
The housing market can be unpredictable. When interest rates rise, buyer caution is likely. A 0.25% increase in August, followed by another in early autumn, could cause the market to slow. Predictions of a housing crash proved inaccurate, but any slowdown may hit property hot spots first, leading to more realistic asking prices.
Currently, houses sell for about 95% of their asking price. With expected rate increases, this might drop to just under 90%, pressuring sellers to adjust their asking prices.
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