Under strict lending criteria, banks have seen a dramatic fall in the number of mortgage approvals they have been able to make. According to Bank of England the number of mortgage approvals has fallen to 15 year low.

Inter bank lending rates have increased as financial institutions try to improve their fiscal positions. The cost of fixed rate mortgages has risen and the deposit required has increased.

The advantage of using these credit card balance transfers is that you can keep your debt paying no interest. The savings on interest payments should be used to pay off you debt capital, rather than just paying.

For a credit card user with £2,000 debt, the savings can be very significant. Normal interest charges on a £2,000 credit card debt would be around 18%. This is at least £360 a year interest. It is often the case that people paying the monthly repayment only meet the interest charges so do nothing to reduce the capital and therefore, their debt problem only gets worse.

However, if you can stop interest payments for a period of 6 – 12 months, you have an opportunity to make extra payments.

Note many credit card companies will charge a balance transfer fee of around 2-3%. But, if the transfer is for 12 months, this works out at a very low interest rate. For this reason it is better to get a 12month interest fee period rather than 6 month.

The most important thing on getting a 6 month interest free period is that you don’t miss any payments. If you do miss payments you will probably

• Balance will revert to the lenders standard rate of 17% or greater
• Gain negative credit score making it difficult to get credit cards in the future
• Pay a penalty as well.

To avoid this problem sign up for a direct debit to automatically take minimum payment

Other websites to get best re mortgage rates

Mortgage Warehouse includes discounted re mortgages, interest only re mortgage, capped re mortgage rates and variable re mortgage rates.

Best Remortgage Deals including links to top mortgage related searches

Self Certification Remortgage Rates

Bad Credit Remortgage Rates

- If interest rates rise in the 7 day market funds may be attracted from the 1 month market. The shortage of funds would lead to higher rates of interest in the 1 month market. This would lead a shift of funds to the 1 month market from the 3 month market.

- Expectations are important if people believe the change in interest rate is only temporary then people will not switch from other markets. On the other hand if the change is expected to be permanent the there will be a shift

In established markets such as London money market or stock exchange, changes in expectations in interest rates are quickly translated into price changes and interest changes.

In other markets changes are much slower e.g. building society

Determination of interest rates

Bank Of England as lender of last resort has significant influence over 7 day market rate, therefore the Bank of England will influence all interest rates in the economy

Other short term rates

Government can set the Rate Of Interest on commercial bills, Treasury Bills and CDs

Long term Rates changes: Interest rates may influence long term rates but they will also be affected by factors such as exchange rate , expected rate of inflation

Guide to UK Monetary Policy

Interest Rates in UK at Bank of England website

The reason investors may prefer long term bonds with lower yields to short term bonds is

1. Expectation that short term rates will fall in the future below existing long term rates.

- If investors bought short term rates and then their rate of interest fell then they would be worse off moving back into long term stocks.

- Long term investors prefer income certainty to capital certainty by accepting a lower yields on long dated securities they are obtaining long term income certainty

See also: Interest Rates and length of loan

All investment Carries uncertainty:

· Short Term Investment

With short term investment the uncertainty relates to income. The market value is unlikely to vary much because of the short term to maturity, but on maturity the income may vary. The short term investment enjoys capital certainty but income uncertainty.

· Long term investor

Income is assured for a long time but the market value of the investment may change a lot. The long term investor enjoys income certainty but capital uncertainty

Generally long-term interest rates are higher than short term interest rates because investors prefer capital certainty. The normal expectation for bonds can be shown using a yield curve

Rate of Interest determination

1. Loanable Funds Theory
2. Liquidity Preference Theory

Loanable Theory

Interest Rate Differentials

There are many different interest rates in the economy?

1. When a bank is lending there will be different levels of risk attached in lending therefore the riskier one will have a higher rate of interest.
Therefore interest rates have a risk premium

2. The longer the term of the loan , the greater the uncertainty associated with the loan and for this enhanced uncertainty the lender will expect a higher rate of interest. Interest rates then will incorporate what might be termed a time factor

3. With a higher rate of inflation in the economy , lenders will want to compensate themselves for the expected loss of real value. Therefore the real rate of interest is most important

On this blog there will be advice about the best financial products available in the UK.

This website specialises in mortgages.

Advice on Remortgaging in UK.

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