On 17th January 2023, the industry regulator, the Bar Standards Board decided to hand down an order imposing a ban on a barrister preventing him from continuing to practise after evidence emerged
Millions Of Mortgage Holders Brace For Bank Of England To Raise Interest Rates
What just happened?
The Governor of the Bank of England has driven interest rates into a corner, and it seems that the perfect solution has no longer existed : raise the interest rate to 0.25 percent, as anticipated in the markets, and the bank will impose additional price pressures in the midst of the cost of living crisis with floating rate mortgage holders at the forefront. (1)
What does this mean?
Even if not, the monetary policy committee of the banks is expected to indicate that it is ready to increase rates at its next meeting soon before Christmas. Pickering noted that raising the benchmark rate by 15 basis points from its current all-time low of 0.1% would make monetary policy extremely soft but could have significant impact on rates expectations, which have shifted sharply in the past month. So Berenberg believes that the first step will be an increase to 0.75% by the end of 2022 as the bank is prepared to raise. (2)
One expert said that rate changes this week were modest, but indicated an imminent change in wholesale wave. The crushed households are already facing a cost of living crisis - inflation is projected at 5% and analysts now believe that the Bank of England may be forced to raise interest rates as early as next week. As a result, it will be a blow to millions of homeowners suffering from higher monthly bills and in the wake of mortgage rates falling to record lows in the summer as banks and construction companies struggled to attract new clients. (3)
How does this impact the legal sector?
Many variable-rate mortgages are the standard variable rate (SVR) of individual lenders and can change at any time (for example, after an increase or decrease in the base rate decided by the Bank of England ). The interest rate for each type of loan depends on the credit risk, timing, tax considerations and conversionability of the particular loan. These mortgages have a fixed interest rate for a period of two to five years. (4)
In this sense, a mortgage is like a government bond that generates negative returns. After the 2008-2009 financial crisis some UK "tracker mortgages" are actually increasing and decreasing in accordance with the Bank of England rates. Negative interest rates punish consumers and businesses for maintaining savings in their bank accounts because their value will decline over time. In theory, this is an environment in which you pay the bank to keep your money and get money from the bank to get a loan, including a mortgage. (5)
Given that household and food spending are increasing and inflation is 3.2%, this is likely to have a ripple effect on mortgage interest rates, which means we could also see rates rise in 2022. In the presence of negative interest rates, banks are unwilling to do this, but rather increase bank charges or fees. In some European countries where central bank interest rates have been below zero for many years, mortgage interest rates below zero—or “repayments”—are no longer uncommon. Mortgage lenders are trying to attract borrowers with large deposits, and even those with the fewest down payments are facing the problem of falling interest rates. (6) This will bring in work for firms specialising in conveyancing and finance to guide their clients into buying properties in the current market.
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1https://www.msn.com/en-gb/money/other/millions-of-mortgage-holders-brace-for-bank-of-england-to-raise-interest-rates/ar-AAQhHiW?li=AAwnS0s and https://missoulian.com/news/world/uk-homeowners-brace-for-potential-interest-rate-hike/article_d718b330-c1bf-581b-bc40-196bfbebf540.html
2https://www.cnbc.com/2021/11/03/bank-of-england-could-be-about-to-hike-rates-in-the-face-of-surging-inflation.html and https://missoulian.com/news/world/uk-homeowners-brace-for-potential-interest-rate-hike/article_d718b330-c1bf-581b-bc40-196bfbebf540.html
3http://napavalleyregister.com/news/world/article_ff2b06b6-039e-55d6-91d3-c732bd2be086.html and https://www.dailymail.co.uk/news/article-10144007/Inflation-fears-mortgage-lenders-hike-prices.html
4https://www.expatica.com/uk/housing/buying/your-guide-to-uk-mortgages-747470/ and https://www.investopedia.com/insights/forces-behind-interest-rates/
5https://www.schroders.com/en/insights/economics/what-happens-if-uk-interest-rates-turn-negative/ and https://www.bankrate.com/mortgages/negative-interest-rates-and-mortgage-rates/
6https://www.which.co.uk/news/2021/08/could-mortgage-rates-fall-even-further/ and https://www.schroders.com/en/insights/economics/what-happens-if-uk-interest-rates-turn-negative/