According to figures and data from the Bank of England the level of mortgage defaults in the UK is set to rise over the next three months, with the effects of the credit crunch coupled with other financial problems causing additional strain on household finances and making it increasingly difficult for homeowners to keep up with their mortgage commitments.
The Bank of England states that the effects of the global credit crunch are likely to hit harder in 2008, with an increasing number of lenders reluctant to lend money because of the turmoil in the financial markets.
The Bank of England has already released a report that shows both consumers and businesses found it more and more difficult to get finance in the latter part of 2007, as the credit crunch swept across the country and really took a hold in the financial sectors. The higher costs associated with borrowing and the increased risk of lending had resulted in fewer lenders willing to take a risk, according to officials from the Bank of England.
The comments from officials from the Bank of England have further fuelled speculation about the forthcoming Monetary Policy Committee meeting, which is due to take place next week. Many experts now believe that the increased risk of higher default levels coupled with increased difficulties for businesses and consumers when it comes to borrowing will see the Bank of England push aside inflation worries for now and focus more on economic problems, thus reducing the interest rate.
One economist from Global Insight is expecting the Bank of England to announce a base rate cut following the January MPC meeting, and many others expect at least one additional rate cut by the middle of this year.
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