Best of the Week

Rise in Mortgage Interest Rates To Impact UK House Prices

Interest-Rates / UK Interest Rates Sep 12, 2007 - 02:12 PM

The ongoing credit crunch continued to bite into the mortgage banking sector as two large UK banks announced a rise in their mortgage interest rates, this despite the Bank of England pumping extra liquidity into the money markets and continuing signs that UK Interest Rates have peaked.

Both the Abbey and Halifax have announced rises in their tracker mortgage interest rates of .2% for new borrowers. Other financial institutions are expected to follow suit with further rises expected later this year and into 2008.

The risks to the UK housing market of the US subprime mortgages sparked credit crunch were highlighted in my article of 22nd August (UK Housing Market Crash of 2007 - 2008 and Steps to Protect Your Wealth), which warned of the widening gap between the banks base rate and money market interest rates that the banks use to borrow and lend money between themselves. This difference is increasingly being reflected in the market place as the financial institutions raise the interest rates on products such as mortgages and loans.

The earlier article Hedge Fund Subprime Credit Crunch to Impact Interest Rates (31st July 07), explains the dynamics of the credit crunch, the pressures of which are expected to continue well into 2008 with higher interest rates as the banks announce bad debt warnings over the coming months. This will result in higher interest rates and tighter lending criteria, regardless of cuts by the Bank of England's Base rate. The UK Housing market is expected to have peaked and a downward spiral to set in that will take house prices some 15% lower over the next 2 years.

As well as losers there are also winners. Savers are now enjoying the highest savings rates in 9 years as UK Banks Short on Cash Entice Savers With High Interest Rates (9th Sept 07). The banks are expected to continue to scramble for cash through the door as savings rates on some fixed rate bonds pass 7%.

The following recent articles explain the dynamics of the credit crunch and the continuing impact on the financial sectors

22 Aug 2007 - UK Housing Market Crash of 2007 - 2008 and Steps to Protect Your Wealth
19 Aug 2007 - Credit Crunch Special
31 Jul 2007 - Hedge Fund Subprime Credit Crunch to Impact Interest Rates
01 May 2007 - UK Housing Market Heading for a Property Crash
20 Mar 2007 - The United States of Foreclosure - Subprime fiasco to trigger Stock Market Crash
22 Feb 2007 - US Housing Market Crash to result in the Second Great Depression

By Nadeem Walayat
(c) Marketoracle.co.uk 2005-07. All rights reserved.

The Market Oracle is a FREE Daily Financial Markets Forecasting & Analysis online publication. We present in-depth analysis from over 100 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

Comments

Post Comment (Moderated)

Subject:

Name:

E-mail address (will not be published):

Comment:

Commenting Issue - If on submitting you are returned to the main Index Page (50% chance) then your comment has not been accepted, Follow below steps for 95% chance of comment being accepted.

Click your browser Back button (from main index page).
COPY your comment text from Comment box (i.e. copy to clipboard).
Press PAGE Refresh - You should see the message "You are not authorized to carry out this operation"
Paste your comment back into the comment text box.
Click Submit - If everything goes okay you will remain on the article page with the message "Your comment was held for moderation and will be reviewed shortly".
If instead you are again returned to the main index page then repeat 1-5, alternatively EMAIL to comments @ marketoracle.co.uk quoting the article number.

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2011 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.