The Bank of England yesterday maintained interest rates unchanged for the fifth month as official figures revealed a surprise drop in British factory output and evidence suggesting retailers suffered a poor Christmas, writes the Daily Telegraph.
The Telegraph says some economists believe the base rate has peaked at 4.75%, and the next move will be downwards.
Factory output figures from the Office for National Statistics revealed an unexpected fall of 0.1% in November, matching the unrevised fall for October, confounding economists' expectations of a 0.3% rise. The level of manufacturing output was unchanged on the year.
Economists say the data provides further evidence to the Bank rates do not need to go up again, while pointing to cooling in the housing market as a reason for further downward pressure on rates.
Meanwhile, the Scotsman writes of strong speculation among mortgage lenders the Bank will cut the base interest rate next month.
The European Central Bank also left its key interest rate for countries in the eurozone unchanged at 2%, sparking concerns among UK economists that growth in the eurozone, Britain’s main trading partner, may be faltering.
And in response to the changing economic conditions, some mortgage firms began factoring in a rate cut to their calculations.
Ray Boulger of Charcol said: "The interest rate futures and swaps market, off which fixed-rate mortgages are priced, are predicting the base rate has peaked and are factoring in a fall, certainly by the end of the year.
A GLOBAL PROPERTY derivatives market moved closer to reality on Thursday with the completion of Britain's first swap deal, the Financial Times writes.
Investment bankers from Deutsche Bank and Eurohypo have completed a £40m ($76m) contract for difference that involves the exchange of exposure to the property market without any physical transfer of assets.
Some property experts think the UK could be the first country with a property derivatives market worth billions of pounds.
LORD LEVENE OF Portsoken, chairman of Lloyd’s of London, the insurance market, said insurers need to improve preparations for natural disasters and to price the risk of such events more accurately after a number of catastrophes in 2004, The Times notes.IFAonline
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