UK Interest Rate History

Predicting the future is always a difficult task, especially when it comes to economics. Interest rates in the United Kingdom are a source of concern for many of us - not the past gives us no hint as to the future?

Interest rates are one of the main factors that influence the economy. In the case of most of us, is often their impact on the housing market that is causing the most interest.

The fifth consecutive increase in the Bank of England base rate has left interest rates stood at 5.75% by the summer of 2007. With signs of a slowdown in the housing market, many homeowners were expecting a drop in interest rates.

Many saw the interest rates, as is relatively high and this is certainly the case with respect to a brief period in the first months of 2007. The rates of interest less than a year earlier amounted to only 4.5%.

But interest rates were really that high? Historical evidence suggests that we rarely had it so well. In 1989, the housing market in trouble, the interest rate stood at a seemingly incredible 15%, with mortgage rates often in excess of that level.

In this context, interest rates in 2007 seem rather low.

Large drops of the base rate was not observed until 1992 and 1993. In early 1992 the base rate in the United Kingdom amounted to about 10.5%. By the end of 1993 was down to 5.5%.

That dramatic drop was seen in some exceptional circumstance, but should be a warning for many homeowners. Interest rates can move quickly, leading to significant changes in our mortgage rates.

Interest rates now stand at the highest level in six years, yet we have seen that are still relatively low by historical levels. We're not talking ancient history here is - are we looking at levels within our lives for most of us.

The future of interest rates will be interesting to watch but it is important that we do not base our financial decisions on assumptions about the future direction of rates.

History tells us that interest rates can change quickly ....