Interest rate peak by end of 2007

House prices are predicted to rise and interest rate peak at the end of 2007.



A recent survey states that 55% of those interviewed think prices will rise by 2% to 3% during the next quarter. 45% think prices will remain stable but 5% think that the prices will fall.

Average house prices for next year are predicted at 5.3%. The base rate is expected to fall from 6.03% in December to 5.58% twelve months later.

The housing market is expected to cool over the coming year but lenders expect rates to lower and house price inflation to cool.

Shopping around for a loan 'more important than ever'

With interest rates on many personal loans rising in recent months, it is more important than ever to shop around for the best deal, consumers have been advised.

Analysis has shown that the number of sub-six per cent interest rate loans available has fallen dramatically and many personal loan providers have increased their rates, with eight doing so by around one to two percentage points in the last week alone.

According to Michelle Slade, a personal finance analyst at Moneyfacts.co.uk, there could be a variety of reasons for the increases. One cause could be lenders pre-empting the Competition Commission's enquiry into the Payment Protection Insurance market, which could potentially decrease revenue in this area for them, she stated.

Another reason could be loan providers suffering due to increased levels of problem debt, she suggested, while a third could be providers pushing up prices while demand for loans is higher, thanks to the release of the new 07 car registration plates last week.

Using personal loans is a popular way to finance a car purchase and AA figures show that 25 per cent of Britons intend to buy a car in 2007, up from 20 per cent in 2006.

Smaller loans have been particularly affected by interest rate rises, Ms Slade continued, with lower loan amounts of £3,000 to £5,000 sometimes more than twice as expensive as a larger loan from the same provider.

"Remember it does not always pay to remain loyal to your current account provider, as automatic credit systems will predominantly determine the price you pay, not how well the lender knows you or how long you have banked with them," she said.

US Reduction

To give assurance to equity markets the US Federal Reserve reduced policy interest rates by 0.5%. This action was considered by the US Federal Reserve to be in line with inflation and is to promote sustainable economic growth. It should also help the troubled global finance markets and the steady growth in the UK.

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