UK ‘faces more financial shocks’

The governor of the Bank of England, Mervyn King, has warned that the US sub-prime mortgages crisis poses more risks for the UK’s financial system.

He also revealed that it was Chancellor Alistair Darling who decided not to support a Northern Rock takeover bid.

Mr King told the BBC he had advised the chancellor that governments should not provide financial help to one company so that it could take over another.

BBC NEWS | Business | UK ‘faces more financial shocks’

Northern Rock gets bank bail out

The Bank of England has agreed to give emergency financial support to the Northern Rock, one of the UK’s largest mortgage lenders, the BBC has learned.

However this does not mean that the bank is in danger of going bust, Business Editor Robert Peston says.

There was no reason for people with Northern Rock savings accounts to panic, he added.

The bank has struggled to raise money to finance its lending ever since money markets seized up over the summer.

The decision for the Bank of England to become the “lender of last resort” is extremely rare - and comes after consultation with the Treasury and the Financial Services Authority.

BBC NEWS | Business | Northern Rock gets bank bail out

Bank of England raise interest rates

The Bank of England has raised interest rates for the fifth time within a year, by another quarter of one percent.

Base rates are now 5.75% - their highest level since 2001. That means homeowners face an extra £16 a month on a typical £100,000 mortgage.

And - say experts - rates could go up yet again - after the Bank said it was determined to bring inflation under control.

Employers have warned that ‘relentless’ increases could harm British businesses - and there’s already been a surge of people seeking help with mortgage arrears.

Like the captain of a supertanker, the Bank of England governor Mervyn King is struggling to keep the economy on course.

Four interest rate rises in less than a year have failed to slow the economy down. Now he hopes a fifth 1/4 point rise to 5.75 per cent will stop it running away with itself.

That’s good news for savers but not borrowers, and in particular many homeowners.

Channel 4 - News - Bank of England raise interest rates

Rate rises hit consumer confidence

Consumer confidence fell for the first time in six months during June, as people braced themselves for higher interest rates, a survey showed.

The drop wiped out half of the strong rise in confidence recorded in May, with people worrying about the economy and jobs both now and in six months’ time, Nationwide Building Society said.

Consumers’ willingness to spend money was the only index to rise during June, increasing by two points, although it still remains broadly flat for the past six months and significantly lower than it was this time last year.

The research comes as the Bank of England’s Monetary Policy Committee begins its two-day interest rate setting meeting. It is widely expected to announce a further hike in the cost of borrowing on Thursday.

Channel 4 - News - Rate rises hit consumer confidence

Interest rates to rise again?

The Bank of England governor warns that the cost of borrowing will increase if rising prices continue.

Governor Mervyn King’s warning is the strongest indication yet that more interest rate hikes are on the way.

Although the official level of inflation fell this morning, Mr King observed that the situation for some homeowners looks bleak, with mortgages now at their least affordable level for 15 years.

The bank chief told the Welsh CBI there was a list of worrying inflationary pressures which remained “elevated” and may lead to action by the Bank’s Monetary Policy Committee.

“If these indicators remain elevated, the MPC may need to take further action,” he said.

With it becoming ever easier for householders to borrow from banks, Mr King also warned householders about variable rate borrowing.

He said: “Obvious though the point may seem, it is unwise to borrow so much that the repayments are affordable only if interest rates remain at their initial levels.”

Channel 4 - News - Interest rates to rise again?

Homeowners braced for mortgage rises

The prospect of a rise in interest rates has been upgraded to “imminent” after inflation reached 3.1% in March, more than 1% above the government’s target.

Industry experts say homeowners should brace themselves for a minimum 0.25% rise in the Bank of England base rate next month, which is currently pegged at 5.25%. This would represent the fourth rise of its kind since August last year.

Andrew Montlake, partner at mortgage broker Cobalt Capital, said: “A quarter point rise is almost a dead cert for May, but it could be as high as 0.5%.

Homeowners braced for mortgage rises | News_ | Guardian Unlimited Money

Interest rate fear as inflation goes over 3%

Inflation has gone past 3%, forcing the Bank of England’s governer to write a letter of explanation to Gordon Brown.

Controlling inflation has been at the very heart of the government’s claim to economic competence.

But today for the first time in 10 years, the rate of inflation rose above Gordon Brown’s target.

The Bank of England has the job of meeting that target: the Governor’s now written the Chancellor, explaining what’s gone wrong.

In his letter, Mervyn King talks of growing price pressures within the economy, and most economists believe more interest rate hikes are imminent.

Channel 4 - News - Interest rate fear as inflation goes over 3%

Inflation rise forces explanation

The cost of living has risen at its fastest rate for at least 10 years, forcing the Governor of the Bank of England to write a letter of explanation to the Chancellor for the first time.

The Consumer Prices Index (CPI), the official measure of inflation, rose to 3.1% last month, more than 1% above the Government’s target for inflation.

Governor Mervyn King has to write an open letter to Gordon Brown if CPI hits more than 1% above or below the 2% target.

Channel 4 - News - Inflation rise forces explanation

Inflation the key to Bank’s surprise move

The Bank of England took everyone by surprise today by raising interest rates to their highest in five-and-a-half years, saying it was worried about inflationary pressures in the economy.

In a move immediately slammed by industry groups, the Bank effectively gave warning it would not tolerate inflation-busting wage deals in the current pay round or continued rapid growth in house prices.

The Bank’s monetary policy committee had already raised the cost of borrowing twice in the past six months as the economy grew more strongly than expected in the second half of last year, and as rising utility bills pushed up inflation to well above its government-set target of 2%.

Inflation the key to Bank’s surprise move | | Guardian Unlimited Business

Bank raises rates near 6-year high

Interest rates hit their highest level in nearly six years on Thursday after the Bank of England stunned markets by raising interest rates to 5.25 percent, the third quarter-point hike since August.

Wrongfooted analysts immediately wondered whether policymakers knew something they didn’t.

Perhaps figures due to be published next week, but already seen by the Bank, would show inflation exceeding three percent, forcing a letter of explanation to the government.

The central bank is clearly worried. It blamed an economy pushing the envelope for rising price pressures and said inflation would rise even further before easing back towards the 2.0 percent target.

Economists said further interest rate increases could lie ahead and futures markets quickly moved to reflect the possibility of two more hikes before the year was out.

Bank raises rates near 6-year high | Top News | Reuters.co.uk