The great interest rate rip off part 1

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Housing market appears to be slowing sharply-Business-Money-Mortgages-TimesOnline

 

Activity in the housing market has fallen sharply and price rises have slowed as would-be buyers take fright at the disappearance of low interest rates, according to a report published today.

Hometrack, the property website, found that the number of sales of houses rose by just 4.3 per cent this month, down from a 9.6 per cent increase in April, while the number of new buyers registering with agents failed to rise at all.

The weakness of demand fed into a slight slowdown in house-price inflation.

Prices rose by 0.6 per cent over the month, the report said, taking the annual pace of inflation among properties surveyed by Hometrack to 6.7 per cent, from 6.8 per cent the previous month.

A housing slowdown had been widely forecast after the Bank of England’s votes to raise rates four times since last August.

A fifth rate rise is expected soon and some analysts are forecasting that base rates could climb as high as 6 per cent this year.

However, the most recent housing statistics have failed to confirm decisively that the market has started to slow.

 

 

 

 

End of house price boom is in sight-Business-Columnists-TimesOnline

 

 

 

WHENEVER I write about the housing market I feel a bit like Tom Jones, with his army of underwear-throwing fans. On the one hand it is always good to get a response. On the other, you’re never quite sure what you are going to get.

Anyway, this is a good moment to take another look at housing. Interest rates have risen four times and the message from the Bank of England’s inflation report and last week’s minutes was that they have further to go. Housing slowdowns of varying intensity have hit America, Spain and Ireland, which to some is evidence of global bubble about to burst.

Housing is also in the news as a result of Ruth Kelly’s embarrassing announcement of a delay in the introduction of home information packs (Hips) – they will now be phased in from August 1. There had been fears Hips would bring housing activity to a halt. Now, although the government remains committed, some question whether they will be introduced at all.

So what is happening to Britain’s housing market, and what is going to happen?

When I dropped in at Building Societies Association conference last week, talk of a UK slowdown was high on the agenda. Societies saw an 8% drop in mortgage approvals last month compared with a year earlier, the first such fall since the summer of 2005. Net new advances more than halved between March and April.

 

 

 

Looks like the recessionomic's is starting to take effect.

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Milk price soars as drought hits dairy industry-Business-Industry Sectors-Consumer Goods-TimesOnline

 

The price of milk is soaring worldwide as a drought-stricken dairy industry struggles to meet surging demand for milk products in China and the Middle East.

A doubling in the price of wholesale milk over the past year is creating havoc among food manufacturers, prompting warnings about food price inflation in the UK. Aid organisations have also raised concerns about the depletion of government stockpiles of milk powder.

In the UK, the price of cream has risen 23 per cent over the past year and dairy organisations say that cheese prices will have to rise this summer.

The continuing drought in Australia, which has crippled the country’s dairy output, has raised the wholesale price of skimmed milk powder by 60 per cent in six months. Over the past year, the cost of skimmed milk powder, used widely by the food processing industry, has soared from $2,000 per tonne to $4,800 per tonne

 

Can't wait to find out how interest rates control this inflationary pressure.

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Bank chief gives warning of even higher rates-Business-Money-Mortgages-TimesOnline

 

The Bank of England’s Governor braced borrowers for still higher interest rates tonight, warning that “persistent inflationary pressures” meant that it “may need to take further action”.

In a hawkish speech to business leaders in Wales, Mervyn King reinforced his tough message with a reminder to businesses and households that they must factor in the prospect of dearer borrowing in their budget plans.

“It is unwise to borrow so much that the repayments are affordable only if interest rates remain at initial levels,” he told a CBI Wales dinner, in an apparent warning against financial complacency.

Ahead of figures today that are set to show a further drop in headline inflation, Mr King said that its recent jump above 3 per cent “does look temporary”. Cheaper fuel was likely to keep inflation falling “for several months”, he added.

 

 

 

Looks like the higher interest rates will tackle the world shortage of milk after all Well done Merv!!!!

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Pound jumps as Governor votes for rate rise-Business-Economics-TimesOnline

 

The prospect of further rises in borrowing costs heightened today as The Bank of England's Monetary Policy Committee disclosed that just one vote kept interest rates on hold this month.

Four of the nine members including the Governor Mervyn King and deputy Sir John Gieve voted for a 0.25 per cent rise while the remaining five voted to keep rates unchanged at 5.5 per cent. It is the first time since August 2005 that Mr King has been out-voted.

The vote was much closer than expected with most expecting a 7-2 vote in favour of a hold and analysts immediately said the markets should "batten down the hatches" for a July rate rise. The pound rose sharply in response gaining 2 cents in early trading to $1.9902.

Ian Stannard at BNP Paribas said: “The minutes were far more hawkish than the market was looking for.”

 

 

ING economist James Knightley said: “This vote is a major surprise and suggests that a July hike is probable, as we have been forecasting, with clear upside risks thereafter.”

Howard Archer of Global Insight said: "A further 25 basis points interest rate hike in July now looks highly likely, given that four MPC members were in favour of raising interest rates in June. Furthermore, the minutes give the impression that for some of the other MPC members, it was a question of when to raise interest rates again rather than if."

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Boom times and doom mongers-Business-Columnists-TimesOnline

 

THE markets are very jumpy, worried that the era of low global interest rates is at an end. Rising bond yields, of which more in a moment, are flashing an amber warning signal.

 

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One disturbing aspect of the present situation is that comparisons are being drawn with the early 1970s. Then, as now, commodity prices were booming (which helped persuade the Organisation of Petroleum Exporting Countries to exert some of their pricing power). Then, as now, the global and UK money supply was growing strongly.

In the early 1970s economists such as Alan Walters and David Laidler warned of the inflationary consequences of the soaring money supply. Now economists such as Tim Congdon and my namesake David B Smith do so.

Then, of course, it all ended in tears. The world economy endured nearly two decades of turbulence, including the stagflationary (a double dose of stagnation plus inflation) 1970s. No two periods are alike. In the early 1970s, not only was global money supply growth stronger but so was inflation, even before it headed into the stratosphere (nearly 30% in the case of Britain). Inflation in the industrialised countries averaged between 5% and 6% even over the period 1970-72.

 

 

It is possible to argue that the global economy’s four-year boom has been the result of the easy monetary policy adopted by central banks in the wake of the last global mini-recession in 2001, brought on by the bursting of the dotcom bubble and the 9/11 attacks.

Central bankers would blanch at the idea that they are a cartel but their message has been remarkably uniform recently. Whether it is Mervyn King at the Bank of England, Ben Bernanke at the Federal Reserve or Jean-Claude Trichet at the European Central Bank (or their counterparts elsewhere) the tone has been tough. Interest rates will stay high and could go higher.

 

Economists and analysts at UBS, in a paper, Crisis, what crisis?, have taken a detailed look at whether market worries about inflation are justified. They did this from the bottom up, by looking at the pricing evidence from individual sectors, on a worldwide basis. They also looked at it from the top down, by studying survey evidence on pricing power, of the kind that has worried central banks.

UBS’s conclusion is that we have seen some evidence of increased pricing power in “old economy” sectors like manufacturing but that in other “newer” sectors, including technology, falling prices are still the norm. The survey evidence, it suggests, points to somewhat higher inflation than the exceptional low rates of a few years ago but it says that inflation is stable at these higher levels and not accelerating.

That is a reassuring message for financial markets and the global economy, but it is unlikely to settle the argument about whether current exuberance will spill over into higher inflation. Growth is good. But you can have too much of a good thing.

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World markets are at crunch point-Business-Economics-TimesOnline

 

The earth moved in global financial markets at the end of last week. After March’s sharp tremors across the world’s stock markets, this time it was the turn of the bond markets to shake up investors.

There now seems little doubt that we are approaching a watershed at which global financial conditions, which have been remarkably benign for a protracted period, are shifting to a new and more unpredictable dynamic – one with far-reaching repercussions.

To many observers, the events in the second half of last week will seem arcane. A sudden spate of heavy selling of longer-dated, ten-year US Treasury notes, fostered in part by technical adjustments in the hedging of Americans’ mortgage debt, triggered an abrupt jump in benchmark US bond yields.

Yet far from being arcane or irrelevant, last week’s moves are almost certainly the precursors of a global sea-change in financial markets that will wipe out the key assumptions underpinning dozens of high-risk investment strategies, and undercut the financial logic behind at least some of the present wave of highly leveraged corporate mergers.

It was not merely the scale and speed of the shift in bond markets on Thursday and Friday that hinted at its significance, but also the shattering of an historic trend that embodied the recent, prolonged era of abundant capital and low volatility that has proved so fertile for markets, investors, speculators, and corporate players.

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Fears grow of loan rate rise after bank's debt alert | the Daily Mail

 

Britain could be facing a major debt crisis, the country's top banker has warned.

Bank of England Governor Mervyn King said many of history's financial crises have been caused by excessive debt.

His warning reinforced fears that there will be another rise in interest rates next months.

That could tip millions of household budgets into the red.

Mr King issued his warning at the annual Mansion House banquet in the City of London.

He urged families to 'be cautious about how much you borrow'. And he told bankers 'be cautious about how much you lend'.

The speech came only hours after it emerged that Mr King took a hard line and voted in favour of a quarter-point rise in the base rate at the meeting of the Bank's Monetary Policy Committee earlier this month.

His view was narrowly outvoted, by five to four.

 

Well done Merv caution the Banks and the consumer but only ever punish the consumer with interest rates!!!

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Fears grow of loan rate rise after bank's debt alert | the Daily Mail

 

In theory, rising interest rates will severely restrict house sales and property prices.

On the other side of the equation, however, a shortage of homes, the impact of big City bonuses and the presence of wealthy foreigners will prop up prices in some areas.

 

 

 

Yep because it worked in the 70's, it worked in the 80's and it will work now lol

 

However higher interest rates may help improve City bounses.

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BBC NEWS | Business | House sales matching 1980s boom

 

The number of properties being sold in England, Wales and Northern Ireland has reached its highest level since the property boom of the late 1980s. Figures from HM Revenue and Customs (HMRC) show that 1,859,000 flats and houses were sold in 2006-07.

That was the largest number sold since 1988, the peak of the boom before property prices and sales crashed in the early 1990s.

Both sales and prices in the 2006-07 financial year rose by 11%.

In 1988, the number of homes sold, in just England and Wales, stood at a record level of 2,148,000 before tumbling by more than half a million the following year.

That slump came as interest rates were raised sharply by the government, and house prices also fell, leading to negative equity for some mortgage-holders.

 

Is there a BoE created housing collapse on the way??

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Home sales the highest since boom of the 1980s | the Daily Mail

 

A surge in repossessions in the early 1990s led to a price crash that wiped more than 20 percent off average prices.

This created the phenomenon of negative equity, where people who had bought at the top of the market owed more than their home was worth.

The latest surge in house sales has been built on a borrowing frenzy that has driven personal debt to a staggering £1.3trillion.

Earlier this week, the Governor of the Bank of England Mervyn King warned of a potential debt crisis. He told his audience, including Gordon Brown and City bankers, that many "financial crises" of the past had been caused by excessive debt.

A number of property economists have been saying that house prices are overvalued by at least 20 per cent in terms of their ratio to wages. This again has striking similarities to the boom of the 1980s.

 

And quite rightly the way to curb debt is to charge more for borrowing money, it's just a ridiculous idea to get people to ACTUAL PAY OFF THE DEBT!!!!

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BBC NEWS | Business | Rates too low, Bank deputy says

 

UK interest rates are too low and are helping to drive demand for loans and credit, Sir John Gieve, deputy governor of the Bank of England, has said. Speaking in Guildford, Surrey, Sir John explained why he was one of four rate setters who voted to raise interest rates at the Bank's last meeting.

Analysts are forecasting that the Bank will raise interest rates to 5.75% next week, after holding them in June.

Rates have hit their highest level in six years as inflation has picked up.

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Britons’ savings rate drops to lowest level since 1960 - Times Online

 

Britons are saving the smallest fraction of their income than at any time since 1960 as sharply higher tax bills, interest rates and living costs inflict growing pressure on their finances, it emerged yesterday.

Badly stretched households have resorted to aggressive cuts in what they set aside from pay packets in order to keep up their spending habits as falling disposable incomes strain the nation’s pockets, official figures revealed.

In news that highlighted the intense squeeze on spending power faced by families and individuals across the country, the figures showed that the “savings ratio”, the key measure of how much people save from incomes, tumbled to just 2.1 per cent in the first quarter.

The plunge in the savings gauge, which virtually halved from 3.9 per cent in the final three months of last year, drove it to its lowest level since the start of 1960, when Harold Macmillan was Prime Minister, and the Beatles and Elvis Presley topped the charts.

 

Calculations by Geoffrey Dicks, of Royal Bank of Scotland, revealed that the reality of the savings slump was probably still more severe.

 

Wow there's a shock increase the cost of living and savings drop, these economists know how to earn their money.

 

And we can all look forward to higher food prices thanks to the floods, which will obviously feed into inflation and result in the BoE putting up interest rates to combat it.

 

How the interest rate rise will dampen food consumption is beyond me. Perhaps the rate rise will help to buy more farm land and seeds???

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Bank to resist rate pressure from American credit crisis - Times Online

 

INTEREST RATES are set to rise this week in spite of increasing worries that the contagion from America’s sub-prime mortgage crisis could spread and hit the world economy.

While analysts say Thursday’s vote from the Bank of England’s monetary policy committee (MPC) is likely to be close � and a minority believe that Bank rate will be left on hold � most expect a hike from 5.5% to 5.75%. This would be the fifth rise in less than a year. The European Central Bank and Reserve Bank of Australia will also make interest-rate decisions this week but are set to leave rates on hold.

In contrast, analysts surveyed by Ideaglobal.com, a financial research company, said there was a 75% probability of a hike by the Bank this week.

The “shadow” MPC, which meets under the auspices of the Institute of Economic Affairs, is also clear about the need for a rise, voting 8-1 for an increase, with one of its members favouring a half-point hike. The shadow MPC correctly anticipated last month’s 5-4 vote to keep interest rates on hold. Mervyn King, the Bank governor, and Sir John Gieve, one of his deputies, have warned about the risks to financial stability from highly leveraged deals and the rapid growth of credit. But both are expected to back a rate hike this week, barring a sudden bout of extreme market turbulence.

America’s sub-prime mortgage market � loans to borrowers with a poor credit history � has been reeling under large losses for months and some of these losses have been incurred by hedge funds. Two funds owned by the US investment bank Bear Stearns had to close. Others have been forced to liquidate investments to cover losses. One worry is that this could lead to large-scale selling in financial markets. Another is that the sub-prime mortgage crisis in America could be a foretaste of things to come in Britain’s housing market.

 

Don't worry if there is a crisis Merv will know what to do he'll just put up interest rates.

 

It's a good job we're not in a global market!!!!

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BBC NEWS | Business | UK interest rates tipped to rise

 

UK interest rates are expected to go up to 5.75% this week as the Bank of England moves to combat inflation. The Bank's Monetary Policy Committee (MPC) is due to make its latest monthly rate decision on Thursday.

While rates were kept on hold at 5.5% in June, minutes revealed that four of the nine MPC members, including Bank governor Mervyn King, wanted a rise.

Although UK inflation fell to 2.5% in May, it still remains above the government's 2% target.

 

 

Mr King said last month that people should expect higher interest rates by the end of this year unless consumers and companies slow spending.

He said the Bank was concerned that spending was rising faster than the economy's ability to cope with the higher demand, and said that "more persistent inflationary pressures have picked up".

Global Insight chief economist Howard Archer said that he assumed that the four MPC members in favour of higher interest rates in June would maintain that view at the July meeting.

 

Punish the consumer once again, well done Merv!!!!

 

Is a 2% inflation target desirable and even achievable???

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Britain is leading the way - in rising food prices and energy bills | the Daily Mail

 

Food prices and energy bills are rising faster in Britain than almost anywhere else in the Western world.

 

Shoppers are paying 4.9 per cent more for their weekly groceries compared with a year ago.

This is nearly double the increase of European Union and more than five times higher than France, said the Organisation for Economic Co-operation and Development (OECD)

British homeowners are also paying 4.4 per cent more for their electricity and gas, despite boasts from leading power companies they are cutting their customers' bills.

However, the average consumer in the rest of the European Union is only suffering a 1.5 per cent rise in energy bills.

 

Rip off Britain raises it's ugly head again, at least we can look forward to higher interest rates to help cause a recession to combat this.

 

Merv keeps saying we are spending too much money I would like to know how much money we can spend without causing inflationary problems.

 

Anyone have any ideas????

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Floods drive up broccoli, carrot and potato prices - Times Online

 

Fresh British-grown vegetables will be in short supply this summer and shoppers can expect hefty price increases, horticulture experts have predicted.

The recent floods have damaged thousands of acres of broccoli, cabbage, cauliflowers,potatoes, onions and carrots. Last week the alert was over pea crops but now many growers are reporting losses of up to 70 per cent of their other vegetables.

The situation is described by Sarah Pettitt, the vice-chairwoman of the National Farmers’ Union horticulture board, as critical. It is also unclear whether imports from the Continent will make up any shortfall, because of similar problems with drought and floods across Europe.

 

Yes higher interest rates will combat food price inflation!!!!!!

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BBC NEWS | Business | Bank expected to raise UK rates

 

The Bank of England is expected to raise UK interest rates from 5.5% to 5.75% later, as it resumes efforts to reduce inflation. Most economists predict the rise after Bank governor Mervyn King said recently that inflation remained a concern.

They also point to the fact that while rates were kept level in June, four of the nine members of the Bank's Monetary Policy Committee voted for a rise.

However, a minority of analysts do feel rates may remain on hold for July.

These economists point out that while the most recent figures showed that inflation remained above the government's 2% target, it did actually slow to 2.5% in May from 2.8% in April.

A rise in interest rates from 5.5% to 5.75% would put an extra £16 a month on an average £100,000 repayment mortgage, but it would be good news for savers, who should receive more for their investments.

 

The Bank of England helping to put more people into poverty. Another admission that increasing interest rates isn't combating inflation but hey that's just keep doing it anyway.

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BBC NEWS | Business | Interest rates: Your stories

 

Interest rates: Your stories

 

UK interest rates are likely to rise on Thursday. If they do, rates will have risen five times since last August.

This will have added between £70 and £90 to repayments on a £100,000 standard variable rate mortgage.

Three readers explain how a further rise in interest rates will affect their finances.

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BBC NEWS | Business | Stretched homeowners eye rental option

 

Interest rates are expected to rise on Thursday, a move which could push some homeowners into financial hardship as mortgage costs increase.

Some may face repossession or have to sell their homes in double-quick time.

But with the housing market showing signs of slowing it may not be easy to secure a speedy sale. Homeowners are also reluctant to move out of bricks and mortar that they've built an emotional attachment to.

For people facing such a scenario, the "sale and rent back" option is supposed to offer a way-out.

The sale and rent back concept is easy to understand.

The homeowner sells their property lock, stock and barrel to a company, which then becomes the seller's landlord.

The seller gets to remain - at least initially - in the property but pays a market rent.

What has happened in effect is that the proud homeowner has morphed into a tenant.

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BBC NEWS | Business | UK warning on sub-prime mortgages

 

The Financial Services Authority (FSA) is to take action against five brokers that sell sub-prime mortgages. Following a review of the market, it said some mortgage lenders and brokers offer loans to people who should not be given them.

Sub-prime mortgages are those sold to people with poor credit histories and thus a greater chance of defaulting.

The FSA found examples of people being offered mortgage deals they might not be able to afford.

The regulator said it was very concerned about its findings.

 

"Consumers in the sub-prime market are vulnerable people who may have high debts or a bad credit history," said Clive Briault of the FSA.

 

"It is therefore important that they are properly assessed and advised.

 

"We will not hesitate to take action where we find bad practice," he warned.

 

I think interest rates should go higher to stop this!!!

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BBC NEWS | Business | UK interest rates raised to 5.75%

 

The Bank of England has raised UK interest rates from 5.5% to 5.75%, its fifth rate rise since last August. Its Monetary Policy Committee (MPC) warned that inflation remains a danger, saying "most indicators of pricing pressure remain elevated".

Some analysts have taken that to mean there may be another rise to come.

The rise will add £16 a month to an average £100,000 repayment mortgage, but it could be good news for savers whose cash should earn higher interest.

Charities have expressed concern that higher mortgage costs will leave many borrowers facing difficulties.

"We're seeing more and more people coming in for help with mortgage or secured loan arrears," said Sue Edwards from Citizens Advice.

"People are really stretching themselves to the limit to buy a house and take on a mortgage, so a small increase in interest rates could just tip them over the edge," she told the BBC.

 

Once more the poor are made to pay. Well done the MCP, the consumer once again forced to pay for poor economic management by the Govt and BoE. How long will it be before we are in an economic recession???

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Cheap mortgage era ends with rate rise - Times Online

 

The Bank of England pushed ahead with a fifth rise in interest rates in less than a year yesterday, lifting borrowing costs to a six-year high just as millions more homebuyers face a sudden jump in their mortgage bills.

The decision to order another quarter-point increase in base rates, to 5.75 per cent, the highest level since February 2001, will turn up the heat on hard-pressed households. Economists said yesterday that homeowners and businesses should get ready for further increases in rates this year.

The Bank’s move comes as many homeowners are hit by an abrupt end to cheap mortgage deals that have so far insulated them from the four previous rate rises.

Some 750,000 borrowers will reach the end of two-year fixed-rate loan deals, taken out when base rates were just 4.5 per cent, before the end of the year. They face a stark choice between a costlier variable rate from their lender, or switching to a new, but much more expensive, mortgage fix.

 

It is only in recent weeks that the cost of repayments for new fixed-rate loans has become more costly than for existing mortgages, as past rate increases have been factored into the cost of credit by money markets. As leading business groups sounded warnings that the Bank was risking interest rate “overkill”, the Council of Mortgage Lenders said that ever more people were set to be hit by the expiry of their fixed-rate deals.

 

The BoE has blinkers on and is leading the country into possible the worst recession since the 70's, the dynamics of lending money has changed and the BoE is guilty of failing to adapt. The 2% target is ridiculously low and should be changed.

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Hundreds of thousands will pay – but there are ways to soften the blow - Times Online

 

Adrian Coles, director-general of the Building Societies Association, said: “If people think they are going to have a problem paying their mortgage, they should talk to their building society straight away.”

But brokers gave warning that borrowers tempted to switch to an interest-only deal from a capital repayment mortgage to cut their monthly repayments should do so with caution.

Melanie Bien, of Savills Private Finance, the independent mortgage broker, said: “If you are coming to the end of a fix, consider moving to an interest-only deal for a short period of time. This will reduce your monthly payments as you pay back just the interest and none of the capital. On a £100,000 mortgage at a rate of 5.5 per cent, you would pay £614.09 a month on a repayment basis or £458.33 if you switched to interest-only. However, make sure you switch back to a repayment deal when things become easier otherwise you won't clear your mortgage by the end of the term.”

Borrowers can also cut their monthly repayments by extending the term of the mortgage, but this can be pricier in the long-run. For example, a borrrower who has 20 years to run on a 25 year £100,000 mortgage at 5.5 per cent, can cut his repayments by £73 a month by extending the term by 5 years. But if he fails to shorten the term again, he will pay an additional £19,133 in interest.

 

BoE helping the banking sector increase PROFIT!!!!!

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Homeowner misery as another interest rate rise sparks repossession fears | the Daily Mail

 

A stark warning of repossessions and homelessness among the middle classes has come as the Bank of England raised interest rates yet again.

The latest increase means the monthly cost of a typical £125,000 mortgage is up to £130 more than this time last year.

As much as 44 per cent of the income of many families is now being swallowed up by mortgage costs, pushing household budgets into the red. The Bank's quarter point rise in the base rate, the fifth since last August, takes it up to 5.75 per cent.

This is the highest level for more than six years, and many City experts believe a further rise to 6 per cent - and even beyond - could be in the pipeline.

Increasing the cost of borrowing just means there's more pressure on wage demands, 44% of income going on borrowing is economic suicide yet our wise MCP seems certain to push this figure even higher.

The housing charity Shelter has been contacted by 10,000 people so far this year asking for advice on repossession. Chief executive Adam Sampson said: "With people already overstretching themselves just to get on the housing ladder, this rate rise will push many over their financial limit, leaving them facing mortgage arrears, repossession and even homelessness.

"For many other ordinary families, home ownership is increasingly out of reach."

Debt experts have predicted that 2007 will see a record number of people going bust, either going bankrupt or signing up for an Individual Voluntary Arrangement (IVA), a debt repayment plan which is a step short of bankruptcy.

Research by the credit reference agency Experian has found that the greatest concentration of these are in apparently wealthy areas such as the M4 corridor, Hampshire and parts of Lincolnshire.

Some 30,075 people went bankrupt or took out an IVA between January and March, representing more than 330 a day.

ING economist Rob Carnell predicted the base rate is likely to hit 6 per cent in the last three months of the year. He said: "Before too long, the current spell of tightening will begin to bite and cool housing and in turn consumer spending, perhaps quite abruptly.

The chief of the British Retail Consortium, Kevin Hawkins, warned: "This could well be an increase too far. The rise could cause too great a slowdown.

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AA warns of petrol at £1 a litre as oil price soars | | Guardian Unlimited Business

 

World oil prices shot to a 10-month high yesterday, bringing warnings from the AA that petrol could soon reach £1 a litre at the pumps.The price of benchmark Brent blend crude broke through $74 a barrel in early trading to hit $74.26, just $4 below the record high of last summer.

Having fallen to as low as $54 during the winter, world oil prices have since risen on the back of strong demand, particularly from US refiners and there are fears inventories could be depleted in the world's largest oil consumer.

 

 

Higher oil costs mean more pressure on inflation which ultimately means higher interest rates which do nothing to tackle the root cause which is the oil price, but why let a insignificant point like that get in the way of interest rate rises.