Interest rates could fall twice by June

June 12, 2008

Homeowners and first time buyers have faced tough times over the past year, with a series of five interest rates between august 2006 and July 2007 taking the base rate from 4.5% to 5.75%. For those on variable rate mortgage this has means five rises in the amount that they have to repay each month, which has pushed many households way into the red and has resulted in an increase in the number of repossessions.

For first time buyers it has meant further difficulties with affordability, and many have avoided getting onto the property ladder for now because of the high repayments that they will face on already crippling mortgage loans.

According to recent reports there could be some light at the end of the tunnel for those that are experiencing difficulties as a result of the interest rate rises. The Bank of England has now left interest rates on hold for three months in a row at 5.75%. However. Many had expected the interest rate to fall after the October Monetary Policy Committee meeting. This did not happen, as the MPC committee wanted to look at November forecasts with regards to the state of the economy, but many think that there will be one interest rate cut before this year ends.

Furthermore many industry professionals are predicting that there will be a second interest rate cut in the first half of next year, and that between now and June 2008 interest rates will have fallen at least twice. One industry expert stated: “There is at least a 30 to 40 percent risk the BoE moves in November. But we expect to see signs of softening in fourth quarter data and that will continue into next year.”

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