What Next For The UK Economy?

Industry experts had predicted the interest rate hold but it surely is becoming harder for the Bank of England to make these rate setting decisions.

Rising inflation means that food prices and fuel prices are rising and the Governments target for inflation, which is set at 2 per cent, is not being hit by the Bank of England. The pound is not performing well against the Euro and that means goods and services we import from Europe cost us more. Just these reasons would normally be enough for the Bank of England to increase interest rates.

The problem is the slump in the UK housing market and mortgage mayhem following the credit crunch; this means that the Bank of England is also under pressure to consider the economics here as well as rising inflation.

In the US interest rates have been cut to an all time low of 2 per cent to try and recharge the slowing economy and housing market.

Obviously for everyone with a fixed rate mortgage it really makes no difference what the Bank of England do with interest rates until your out of the fixed rate period.

I'm one of the ‘lucky’ people who can choose to ignore interest rates at the moment and as long as I can afford to continue paying my mortgage there should, fingers crossed, be nothing to worry about. I'm also lucky enough to have almost 40 per cent equity in the property I've mortgaged. In theory I should be able to let the economy do what it's going to do over the next 2 or 3 years.

The people with tracker or base rate mortgages will continue with the same monthly payments, the issue for these people may come if and when interest rates begin to rise.

No-one really knows how far house prices will fall either. There are statements like ‘house prices are at there lowest since 19922 and so on, however all this really means is that house prices have not continued to increase at the dramatic levels we've been used to for the last 5 years or so. Over the last year house prices have slowed or even fallen but over the last 10 years house prices continue to rise.

If you have savings then you should make the most of these times, interest rates on savings accounts are available up to 7 per cent. Get saving and clear your debts should be the message for everyone!

Simon Duffy writes for the Financial Blog a UK Finance Blog talking about all aspects of personal finance including loans blogs.