World Economic outlook - UK. Mortgage interest rates forecast 2012 : The Bank of England held interest rates at their record low for a 27th month, as the City bet a rate rise will not arrive until well into 2012. Despite rising prices – inflation is more than double the 2pc target at 4.5pc – the Bank's Monetary Policy (MPC) has so far refused to raise rates from their 0.5pc low to curb the pace of price rises.
In its Financial Stability Report released today the Bank says wholesale funding costs will rise leading to higher mortgage rates.
It states: “At the beginning of the financial crisis, when funding costs rose sharply, banks were relatively slow in updating the price of new mortgages and the residual remained negative for around a year. This suggests it may be during 2012 that any significant increase in banks’ lending rates occurs.”
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