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Borrowing is Still Expensive
Interest rate will not fall significantly as a result of inflation and energy prices. Borrowers will find loans expensive this year.
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February 21, 2008 (FPRC) -- Interest rates will fall but with a moderate rate, the Bank of England signalled on Wednesday, giving a blow to the early predictions of financial markets and lending agencies. One more cut in borrowing costs is still on the cards. Borrowing from UK financial market will be cheap but not that cheap as was anticipated.
The quarterly inflation report of Bank of England's showed inflation rate above the central bank's 2 percent target in two years. BoE has expected retardation in inflation rate to 4.5 percent by the end of 2008. But, according to estimates, inflation maximum can fall below 2 percent. Rising inflationary pressures due to strong food and energy prices are creating adverse effects on the UK economy. Now, the Consumer Price Index rate is expected to reach 3 percent by the middle of this year which makes the day to day life also expensive.
"The interest rates are not going to fall as far and as fast as markets currently seem to think," said Jonathan Loynes, chief UK economist at Capital Economics. "The indication is that it's going to proceed with bringing interest rates down at a fairly steady pace," added Loynes.
As the interest rates are more or less higher, borrowing will remain a costly affair. Except secured loans, all loans without security will now witness a squeezed availability.
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