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Bank of england raises rates first time four years Original Source Link: (May no longer be active)    http://www.thisislondon.co.uk/news/business/articles/timid70152?source= http://www.thisislondon.co.uk/news/business/articles/timid70152?source= Bank raises rate to 3.75% Jane Padgham, Evening Standard 6 November 2003 THE Bank of England today raised interest rates for the first time in nearly four years. The move, which will mean dearer mortgages for millions of variable rate borrowers, increased the base rate from 3.5% to 3.75%. It is the first increase in the cost of borrowing since February 2000 and follows a series of rate reductions aimed at jump-starting the flagging economy. More increases are expected in coming months. Today's rise had been tipped by most City analysts because of the resurgent housing market, record levels of consumer debt and mounting signs the economy is picking up speed. The Nationwide was the first of the big lenders to respond to today's rise. It said it is putting up its mortgage rate by 0.35% to 4.89% from 1 December. Rivals Halifax, Abbey National and Bradford & Bingley said they had put their rates under review. Variable rate mortgage customers have been enjoying the lowest rates for 50 years, but lenders are expected to pass on all or part of the increase to borrowers. If passed on in full, homebuyers with a £50,000 repayment mortgage will typically see their monthly bill rise by around £7.50 to £315. A £100,000 borrower will pay about £630, £15 more, while the repayments of a £250,000 borrower will increase by about £37.50 a month to £1,570. Savers are expected to gain because of higher interest payments. The City took the widely expected rise in rates in its stride as it warned of further increases in coming months. The increase by the Bank's monetary policy committee brings to an abrupt end the rate-cutting cycle that has been in place for more than two years. It follows increasing evidence that the economy is picking up speed. It also reflects growing concerns that the housing market boom and record levels of household debt could trigger a consumer crash. In a statement, the Bank said: 'The global economic recovery appears to be gathering momentum, though the pattern is uneven. After slowing at the start of the year, growth in the UK has picked up and credit growth remains strong.' It said business surveys suggested the recovery was becoming more broad-based and that neither household spending nor the housing market had slowed by as much as expected. 'Underlying inflationary pressures are therefore likely to build gradually as demand strengthens and sterling's depreciation earlier this year feeds through,' it added. The FTSE 100 index of blue-chip shares was up 28.2 at 4331.6 while sterling was also unfazed at $1.6745 and 68.30p against the euro. Economists said today's move was the first of a series of similar rises expected in the months ahead. A London Evening Standard poll conducted earlier this week revealed that the pundits' consensus forecast is 4.25% by the end of next year. Futures markets are pricing in 5.25% by December 2004. Simon Rubinsohn at stockbrokers Gerrard said: 'We are looking for the next move in the first quarter of next year, probably in February to coincide with the Bank's quarterly Inflation Report. But we don't think policy will be tightened aggressively.' John Butler at HSBC said of the MPC's statement: 'This does not sound like a central bank that is trying to give a stern warning to the consumer, neither does it sound like it is ready to hike again in December.' Business leaders urged the Bank to take its finger off the rates trigger, warning that further rises could hit manufacturing and put the economic recovery at risk. CBI director-general Digby Jones said: 'This rate increase is understandable providing it represents no more than a reversal of July's precautionary cut and not the beginning of a swift upward movement.' Milan Khatri, chief economist at the Royal Institution of Chartered Surveyors, said the move would have little impact on the housing market. 'Highly-mortgaged homebuyers will swallow today's small rises, but the Bank cannot afford to take it too far too quickly,' he said. Within an hour of the Bank's decision, the European Central Bank announced it was freezing eurozone rates at 2%.

Bank of england leaves rate 4 5 in september 2005 { September 8 2005 } Bank of england raises rates first time four years Blair will take britain into euro by 2007 British bank acquires firm { November 15 2002 } British opposition to euro 45perc { May 20 2003 } British pound hits peak against dollar { June 2007 } British sterling pound is third most reserve currency Britons hate euro { July 31 2002 } Britons pile on credit card debt Dollar drops to 26 year low vs pound { June 2007 } Imf warns britain to curb public spending { December 19 2003 } Secrets of the bank of england revealed Sterling and gold surged highest levels decade { January 6 2004 } Files Listed: 13

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